Asset Revaluation and Accounting Principles
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Questions and Answers

What happens if an asset's carrying amount is increased due to revaluation?

  • The increase is recognized in other comprehensive income. (correct)
  • The increase is treated as a liability.
  • The increase is ignored.
  • The increase is recognized in profit or loss.

    • A decrease in an asset's carrying amount due to revaluation is always recognized in other comprehensive income.

    False

    What is the revalued amount of the asset as of 1st April, 20X3?

  • 9,00,000
  • 8,00,000
  • 10,00,000
  • 9,60,000 (correct)

    • What is the heading under which an increase in revaluation is accumulated in equity?

    <p>revaluation surplus</p> Signup and view all the answers

    If a gain from revaluation is realized within the limits of a previous decrease, it is recognized in _____ and increases the revaluation surplus.

    <p>other comprehensive income</p> Signup and view all the answers

    The additional depreciation for the period 20X3-20X4 is 30,000.

    <p>True</p> Signup and view all the answers

    What is the treatment for a decrease in the carrying amount of the revalued asset if the revaluation surplus exists?

    <p>Recognized in profit or loss up to the limit of the existing surplus.</p> Signup and view all the answers

    What is the useful life of the asset as stated in the content?

    <p>10 years</p> Signup and view all the answers

    The depreciation charge for each period should be recognized in ___________ unless it is included in the carrying amount of another asset.

    <p>profit or loss</p> Signup and view all the answers

    Match the following treatment types with their corresponding situations:

    <p>Increase in carrying amount = Recognized in other comprehensive income Decrease in carrying amount with surplus = Recognized in profit or loss First time revaluation = Increase recognized in equity Subsequent revaluation decrease = Recognized up to the surplus limit</p> Signup and view all the answers

    Match the following items with their values:

    <p>Historical Cost Depreciation = 90,000 Actual Depreciation Based on Revalued Amount = 1,20,000 Balance Arising on Revaluation = 2,40,000 Closing Balance on Revaluation Surplus = 2,10,000</p> Signup and view all the answers

    Why is a previous revaluation decrease recognized in profit or loss when a revaluation increase occurs?

    <p>To reverse the impact of the earlier decrease.</p> Signup and view all the answers

    How is additional depreciation calculated?

    <p>Subtracting historical cost depreciation from actual depreciation based on the revalued amount</p> Signup and view all the answers

    A surplus recognized from revaluation can be utilized to offset future losses.

    <p>True</p> Signup and view all the answers

    Each part of an item of property, plant, and equipment should be depreciated as a whole.

    <p>False</p> Signup and view all the answers

    What is the total amount transferred to retained earnings after revaluation?

    <p>30,000</p> Signup and view all the answers

    What is the treatment of a revaluation surplus included in equity when an asset is derecognized?

    <p>It is transferred directly to retained earnings.</p> Signup and view all the answers

    The effects of taxes on income resulting from the revaluation of property, plant, and equipment are recognized in profit or loss.

    <p>False</p> Signup and view all the answers

    What amount is transferred from the revaluation surplus to retained earnings as the asset is used?

    <p>The difference between depreciation based on the revalued carrying amount and depreciation based on the asset’s original cost.</p> Signup and view all the answers

    A revaluation gain in __________ must be recognized to the extent that it reverses a revaluation decrease of the same asset.

    <p>profit or loss</p> Signup and view all the answers

    How is a revaluation loss treated when there is a credit balance existing in the revaluation surplus for the asset?

    <p>It is recognized in other comprehensive income.</p> Signup and view all the answers

    Remaining increases in revaluation are recognized in profit or loss.

    <p>False</p> Signup and view all the answers

    What must happen to the balance of revaluation surplus when an asset is fully retired or disposed of?

    <p>The whole of the surplus is transferred to retained earnings.</p> Signup and view all the answers

    Match the term with its correct description:

    <p>Revaluation Gain = Recognized to the extent of reversing a revaluation decrease Transfer to Retained Earnings = Occurs upon asset derecognition Revaluation Loss = Recognized in other comprehensive income if surplus exists Tax Effects = Recognized according to Ind AS 12, not in P &amp; L</p> Signup and view all the answers

    Study Notes

    Revaluation of Assets

    • Assets are revalued to reflect their current market value.
    • The revaluation model is used for certain classes of assets such as office buildings.
    • The revaluation surplus is recognized in other comprehensive income and accumulated in equity.

    Treatment of Revaluation Gain or Loss

    • If the carrying amount of an asset increases due to revaluation, the increase is recognized in other comprehensive income (OCI).
    • If the carrying amount of an asset decreases due to revaluation, the decrease is recognized in profit or loss (P&L).
    • If a previous revaluation decrease was recognized in P&L, the current revaluation increase is recognized in P&L up to the amount of the previous decrease.
    • If a previous revaluation increase was recognized in OCI, the current revaluation decrease is recognized in OCI up to the amount of the previous increase.

    Transfer of Revaluation Surplus

    • The revaluation surplus in equity can be transferred to retained earnings when the asset is derecognized.
    • The transfer can be made when the asset is retired or disposed of, or gradually as the asset is used.
    • If the surplus is transferred gradually, the amount transferred is the difference between depreciation based on the revalued carrying amount and depreciation based on the original cost.

    Depreciation of Revalued Assets

    • The depreciable amount of an asset is allocated systematically over its useful life.
    • The depreciation charge is recognized in P&L unless it is included in the carrying amount of another asset.
    • Significant parts of an asset are depreciated separately.

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    Related Documents

    Ind AS 16 PDF - Property, Plant & Equipment Accounting

    Description

    This quiz covers the key concepts of asset revaluation, including the treatment of gains and losses and the transfer of revaluation surplus. Understand how revaluations impact financial statements and equity. Test your knowledge on the accounting standards regarding asset revaluation.

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