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Financial Accounting II (MGT401)
Topic: "Property, Plant and Equipment (IAS-16)

Learning Objectives: Students will be able to learn the basic principles of revaluation as per IAS 16 on Property, Plant and Equipment.


HXN Ltd. - a textile manufacturing firm located in Karachi has the policy to recognize its fixed assets (tangible) initially at cost and subsequently at cost less accumulated depreciation and impairment losses. Depreciation on the fixed assets is charged appropriately to write off the cost over estimated useful life of the assets.

In the financial year 2013-14, the company decided to revalue its plant assets. The data regarding this revaluation is as follows:


Gross Carrying Amount (Rs.)

Accumulated Depreciation (Rs.)

Net Carrying Amount (Rs.)

Revalued Amount (Rs.)












Determine the revalued gross carrying amountrevalued accumulated depreciationrevalued net carrying amount and revaluation surplus supporting necessary workings, where necessary.


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Our main purpose here discussion not just Solution

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According to IAS 16

If a revaluation results in an increase in value, it should be credited to other comprehensive income and accumulated in equity under the heading "revaluation surplus" 

A decrease arising as a result of a revaluation should be recognised as an expense to the extent that it exceeds any amount previously credited to the revaluation surplus relating to the same asset. 

Depreciation After Revaluation

The depreciation in periods after revaluation is based on the revalued amount. In case of Axe Ltd. depreciation for 2011 shall be the new carrying amount divided by the remaining useful life or $190,000/17 which equals $11,176.

International Accounting Standard 16 Property, Plant and Equipment or IAS 16 is an international financial reporting standard adopted by the International Accounting Standards Board (IASB). It concerns accounting for property, plant and equipment (known more generally as fixed assets), including recognition, determination of their carrying amounts, and the depreciation charges and impairment losses to be recognised in relation to them.

IAS 16 was issued in December 1993 by the International Accounting Standards Committee, the predecessor to the IASB. It was reissued in December 2003 and has been amended multiple times, most recently in May 2012.

IAS 16: Property, plant and equipment

The accounting standard IAS 16 sets out how entities should report their investment in property, plant and equipment. On this page you can access a range of articles, books and online resources providing quick links to the standard, summaries, guidance and news of recent developments.

Full-text standard
The International Accounting Standards Board (IASB) provides free access to the consolidated unaccompanied international accounting standards for the current year through its sites

These standards are the unaccompanied versions and do not include any additional content that accompanies the full IAS and IFRSs such as illustrative examples, implementation guidance and bases for conclusions.

Without useful life given and what method of depreciation is used by company.. how to solve this GDB?

Cost and Accumulated Depreciation of the asset before revaluation:

Cost of Asset/Gross carrying Amount Rs. 500,000
Accumulated Depreciation Rs. 200,000
Carrying amount Rs. 300,000

• Suppose the asset is revalued at Rs. 450,000


• Now the cost and accumulated depreciation of the asset would be restated as follows;

Gross carrying Amount
(500,000 x 450,000 / 300,000) Rs. 750,000
Accumulated Depreciation
(200,000 x 450,000 / 300,000) Rs. 300,000
Carrying amount Rs. 450,000

itni tu smj a gyi ha net carrying amount?

explains with example ker dia 

ab kia reh geya hai apply kerna hai above question par 

baki chapter no 6 and 7 read kar lain ap sahi say ho jai ga

For Plant:

Revalued gross carrying amount,

(7,460,000*9,950,000/7,230,000) =          10,266,528.35

Accumulated Depreciation

(230,000*9,950,000/7,230,000) =                  316,528.35

Revalued net carrying amount =                950,000.00

For Machinery:

Revalued gross carrying amount,

(2,350,000*3,050,000/1,910,000) =             3,752,617.8

Accumulated Depreciation

(440,000*3,050,000/1,910,000)=                    702,617.8

Revalued net carrying amount =            3,050,000.00

revaluation surplus can not be calculated because the percentage of depreciation under written down value/useful life of assets is not given in question, if any body have any idea how to calculate without that please reply.

i think double entry bane ge 

If we assume that the depreciation is charged at 20% on written down value then,

Revaluation surplus:( Plant)


Depreciation charged on old carrying amount= Rs 1,446,000

On the revalued amount depreciation would be 1,990,000

The difference of 544,000 would be transferred from revaluation surplus to retained earning.

Revaluation surplus:


Depreciation charged on old carrying amount = Rs 382,000/-

Depreciation charged on revalued amount = 610,000

The difference of Rs. 228,000/- would be transferred from revaluation surplus to retained earning.

Please comment if there is any other way out to calculate revalued surplus


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