In: Accounting
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.
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.
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