ACCA Applied Knowledge · Financial Accounting · The main elements of financial statements
A company revalues a property upward by $40,000 and credits a revaluation surplus. Which statement is correct under IFRS?
The $40,000 revaluation gain meets the definition of income because assets and equity rise without any owner contribution. Under IAS 16 it is reported in other comprehensive income, not profit or loss, and no cash is needed.
- AIt is income and is recognised in profit or loss
- BIt is income and is recognised in other comprehensive incomeCorrect
- CIt is a contribution from owners and is recognised directly in equity
- DIt is not income because no cash has been received
Explanation
The increase in an asset that raises equity (not from owners) meets the definition of income. Under IAS 16, the revaluation gain is recognised in other comprehensive income and accumulated in a revaluation surplus. Cash receipt is not required for income, so D is wrong, and it is not an owner contribution.
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