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ACCA Applied Knowledge · Financial Accounting · Tangible non-current assets

Kiro Co owns two properties, X and Y, both in the same class of property, plant and equipment. Kiro adopts the revaluation model. Property X was revalued upwards by $50,000 last year. This year Property X has fallen in value by $70,000 below its carrying amount and Property Y has risen by $30,000. What is the charge to profit or loss this year in respect of these revaluations?

The charge to profit or loss is $20,000. The $70,000 fall on Property X is first set against its $50,000 existing surplus, and the excess $20,000 is expensed. Property Y's $30,000 gain goes to other comprehensive income and cannot be netted against X.

  1. A$20,000Correct
  2. B$70,000
  3. C$40,000
  4. D$0

Explanation

Revaluations are assessed asset by asset. Property X's fall of 70,000 is first set against its own surplus of 50,000 through OCI, leaving 20,000 charged to profit or loss. Property Y's gain of 30,000 goes to the revaluation surplus and cannot be offset against X's deficit. Netting both would wrongly give 40,000 of surplus.

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