Question

AASB 116 requires that ‘revaluations shall be made with sufficient regularity to ensure that the carrying amount does not significantly differ from that which would be determined using fair value at the end of the reporting period.’

Required:

Do you think there are some implications for the upward revaluations of property plant and equipment on companies’ profit? Justify your answer.

Answer 1

The asset is to be revalued to fair value

An upward revaluation recognised in OCL (other current liablities) as

Date	particulars	l/f	debit	credit
	Asset a/c		$100000
	To Reval surplus			$100000

A downward revaluation recognised in P/l (profit and loss) as

Date	particular	l/f	debit	credit
	Reval loss a/c		$100000
	To Asset			$100000

If reversing the previous revaluation

. An upward revaluation through P/l

. A downward revaluation through OCL

Example

Land at $100000

T1 Revaluation to $120000

T2 revaluation to $90000

Date	particulars	l/f	debit	credit
	PPE a/c		$20000
	To Reval surplus			$20000
	Reval surplus a/c		$20000
	Loss a/c		$10000
	To PPE a/c			$30000