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Posts
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Question.
Grange acquired a plot of land on 1 December 2008 in an area where the land is expected to rise signifi cantly in
value if plans for regeneration go ahead in the area. The land is currently held at cost of €6 million in fi xed assets
until Grange decides what should be done with the land. The market value of the land at 30 November 2009
was €8 million but as at 15 December 2009, this had reduced to €7 million as there was some uncertainty
surrounding the viability of the regeneration plan.Can anybody answer why we don’t need to do anything with “as at 15 December 2009, this had reduced to €7 million” ?
Thank you!
I would say it’s because you do not use the revaluation model but, as the example states, the cost model is used. So you are not impacted by the decrease in market value.
Thank you for your reply.
Someone said that is because of the fiscal year, this company would only recognize data at/before 30 Nov 2009.
That really makes me confused
Do they have a year end at 30 November? This is not mentioned in the question. If their year end is 30 November and the fall in value happened afterwards it is not an adjusting event. However I think it’s more relevant for this question that they do not use the revaluation model. Same effect, different reason.
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