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Dear sir,
From my understanding we should recognise the r/s when:
1. We did a revaluation on an asset and there’s a gain from it
2. After we did a revaluation on an asset the deprecation will change, therefore we should transfer the difference between the old and new depreciation from R/s to r/e.
However my question is:
1. When should we transfer r/s to r/e from the difference of depreciation? Is it when the end of the reporting date?
So for example if the revaluation happen in june then the r/s to r/e is the accumulated amount of difference between june-dec?
2. If in the exam there’s a question that ask for r/s for the year should we include the transfer or r/s from revaluation only?Thankyou for your time! ?
This transfer is not a requirement … it’s seen as good practice, but it’s not automatic
Watch out for this in a question … it MAY say either that there is no annual transfer or that there is, so be careful
When to do the transfer?
At the end of each accounting year. So, if depreciation would normally have been (say) $3,000 for the year (or part year) and, as a result of the revaluation, that depreciation expense has risen to $3,500, then the question MAY direct you to make a transfer of $500 from revaluation reserve to retained earnings …
… or it may say that no transfer is to be made
And each year this difference between what the depreciation WOULD have been without the revaluation and how much the depreciation is now after the revaluation may be transferred from revaluation reserve to retained earnings
OK now?
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