Question

In: Accounting

Ignoring reversals of previous revaluations, do you think that requiring revaluation decrements to be part of...

Ignoring reversals of previous revaluations, do you think that requiring revaluation decrements to be part of the period’s profit or loss but requiring that revaluation increments go to comprehensive income is consistent with the requirements of the Conceptual Framework?
Explain your answer.

Solutions

Expert Solution

No. It is not consistent with conceptual framework. We should consider previous revaluations and reversals of the particular asset.

Explanation:

If an asset's carrying amount is increased as a result of revaluation, the increase should be recognised in other comprehensive income and accumulated in equity under heading of revaluation surplus. However, the increase should be recognised in profit or loss to the extent that it reverses the revaluation decrease of the same asset previously recognised in profit or loss.

If an asset's carrying amount is decreased as a result of revaluation, the decrease should be recognised in profit or loss. However, decrease should be recognised in other comprehensive income to the extent of any credit balance existing in revaluation surplus in respect of that asset. The decrease recognised in other comprehensive income reduces the amount accumulated in equity under the heading of revaluation surplus.

Thankyou.....


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