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Dear Chris,
How are you?
I hope you are doing well,
In the statement of change in the equity there is transfer to retained earnings.
Could you explain what does that mean and why it resulted in deduction of revaluation surplus?Hi,
It is a transfer of one of the other reserves to retained earnings and is usually done as part of a revaluation of PPE.
On a revaluation we depreciate the revalued amount over the remaining useful life of the asset, which will result in a higher depreciation charge through profit or loss and a reduction in retained earnings. To compensate for this reduction in retained earning we take a proportion of the revaluation surplus each year and move it to retained earnings to compensate for the additional depreciation that will have reduced the retained earnings.
Thanks
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