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P2-D2.
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ty0311
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Hi Chris,
Enjoying your lectures so far!
I just finished watching your SOCE lecture as part of chapter 3 FR. As I am not too familiar with SOCE, could you please shed some light on what should be reported in the ‘Transfer to retained earnings’ row? There is also no explanation in the notes.
From the pro forma, it seems that there is a positive impact to retained earnings and a negative impact to the revaluation surplus.
Very much appreciated in advance!
Regards,
Tim
P2-D2
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Hi Tim,
Glad that you’re enjoying the lectures so far and welcome to the forum.
The transfer is for the excess depreciation that is now being charged following the revaluation. So, if we previously charged 10,000 before the revaluation and now we charge 15,000 following the revaluation then the excess is the 5,000.
This 5,000 would appear as a reduction to the revaluation surplus and an increase in retained earnings.
Thanks
ty0311
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Thank you for the explanation sir.
So as we credit retained earnings and debit revaluation surplus by the same amount (of $5,000 in your example), does it also mean that the net impact of this transfer for the excess depreciation to the total equity is 0? And if this is correct, then can I assume that this is the reason why it is not a requirement for companies to report their SOCE with this line?
Thanks again!
Regards,
TimP2-D2
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Hi,
Your debit/credit entry above is correct and the point about the net effect on equity being zero too. However, companies would show it within the SOCIE in the published accounts.
Thanks
ty0311
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