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Statement of change in the equity

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Statement of change in the equity

  • This topic has 2 replies, 2 voices, and was last updated 1 year ago by 7fsa.
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    Posts
  • March 28, 2021 at 9:03 am #615355
    7fsa
    Participant
    • Topics: 58
    • Replies: 41
    • ☆☆

    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?

    April 1, 2021 at 5:32 pm #615698
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6451
    • ☆☆☆☆☆

    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

    April 2, 2021 at 12:39 pm #615762
    7fsa
    Participant
    • Topics: 58
    • Replies: 41
    • ☆☆

    Thank you so much dear.

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