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Chapter 7
2.2 Equity transfer
When a non-current asset has been revalued, the charge for depreciation
should be recalculated based upon the revalued amount and the remaining
useful life of the asset.
The charge will be higher than depreciation prior to the revaluation and will be
charged to profit and loss as normal.
The entity can choose whether or not to make an annual transfer within equity
of the excess of the new annual depreciation charge over the old depreciation
as follows:
Debit Revaluation surplus
Credit Retained earnings
2.3 Disposal of a revalued asset
The disposal of a revalued asset is recorded as normal, with the asset and
accumulated depreciation amounts cleared to a disposal account so that a gain or
loss on disposal can be calculated. However, with a revalued asset there is an
additional step required to clear any balance on the revaluation surplus in relation to
the disposed asset. This is done as follows:
Debit Revaluation surplus
Credit Retained earnings
Tutor notes guidance – discussion points
Take students through Illustration 3 from Chapter 8 of the Study Text.
At this stage discuss with students the disclosure requirements of IAS 16 with
reference to the movement schedule which is near the end of chapter 8.
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