Question

On 30 June 2020 the CEO has asked you to selectively revalue Land and Buildings to improve the balance sheet. You note that some of the Land and Buildings on the balance sheet have fair values higher than their carrying amounts while others have fair values lower than their carrying amounts. Furthermore, some items of Land & Buildings have fair values that are difficult to measure reliably. Explain to the CEO how the relevant Australian accounting standard limits opportunistic revaluation s.   

Answer 1

To Limit the opputunistic revaluation Australian accounting standard boad in its standard AASB116 name plant , property and equipment has stated that if there is revaluation of particular plant , property and equipment then each asset in that class have to be revalued.

So CEO cant ask to selectively revalue land and building at fair values. If one land and building is revalued then all land & building will be revalued as all land and bulding are one class of plant proprty equipment.

There cannot be mixture of Assets within same class recored using either fair value or book value. Either all should be measured at fair values or all should be at book values.

So even the land and buldings having fair value less then book value would be recorded at fair value and difference would be recorded as impairementt loss as per AASB 136.

Further AASB116 states that plant property equipment whose fair value cant me measured reliably they cant be revalued at fair value .Since some land buildings are there whose fair value cannot be measured hence they can not be recorded at fair values.

And as rules says if all land and buldings cant be  recorded at fair value then then they shoudnot be revalued.

Hence no land and buildings can be recoorded at fair values