We are here with you hands in hands to facilitate your learning & don't appreciate the idea of copying or replicating solutions. Read More>>
+ Link For Assignments, GDBs & Online Quizzes Solution
+ Link For Past Papers, Solved MCQs, Short Notes & More
Dear Students! Share your Assignments / GDBs / Quizzes files as you receive in your LMS, So it can be discussed/solved timely. Add Discussion
How to Add New Discussion in Study Group ? Step By Step Guide Click Here.
MGT401 Financial Accounting II Assignment No 01 Solution & Discussion Due Date: 2 December, 2015
East Leather Industry is a leather manufacturing organization in Sahiwal. The company is following “IAS – 16” for recognition of fixed assets of the company. Initial recognition of fixed assets is carried at cost and subsequent to initial recognition is done at cost less accumulated depreciation and any accumulated loss. On 1st January 2015, company decided to revalue its plant and equipment. The information about revalued assets is as follows:
Gross Carrying Amount (Rs.)
Accumulated Depreciation (Rs.)
Net Carrying Amount (Rs.)
Revalued Amount (Rs.) Plant 524,000 45,000 479,000 621,000 Equipment 756,000 65,000 691,000 930,000
Requirement: You are required to calculate; a) Revalued gross carrying amount b) Revalued accumulated depreciation c) Revalued net carrying amount d) Revaluation surplus Note: Also show necessary working
IMPORTANT: 24 hours extra / grace period after the due date are usually available to overcome uploading difficulties. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience.
.+ http://bit.ly/vucodes (Link for Assignments, GDBs & Online Quizzes Solution)
+ http://bit.ly/papersvu (Link for Past Papers, Solved MCQs, Short Notes & More)+ Click Here to Search (Looking For something at vustudents.ning.com?) + Click Here To Join (Our facebook study Group)
Please Discuss here about this assignment.Thanks
Our main purpose here discussion not just Solution
We are here with you hands in hands to facilitate your learning and do not appreciate the idea of copying or replicating solutions.
Sir, there is a confusion in the question. there is written that "The information about revalued assets is as follows: it means the assets already revalued??? what we have to do? just to calculate the figures??
Dear Students Don’t wait for solution post your problems here and discuss ... after discussion a perfect solution will come in a result. So, Start it now, replies here give your comments according to your knowledge and understandings....
please explain this question..
Revalued Gross Carrying Amount= (524000/479,000) x 621000
Revalued Gross Carrying Amount= 679340.292
Revalued Gross Carrying Amount= (756,000/691,000) x 930000
Revalued Gross Carrying Amount= 1017481.91
Revalued Accumulated Depreciation= (45000/479000) x 621000
Revalued Accumulated Depreciation= 58340.2921
Revalued Accumulated Depreciation= (65000/691000) x 930000
Revalued Accumulated Depreciation= 87481.9101
Revalued Net Carrying Amount= 679340.292- 58340.2921
Revalued Net Carrying Amount = 621000
Revalued Net Carrying Amount = 1017481.91 - 87481.9101
Revalued Net Carrying Amount = 930000
Revaluation surplus= Revalued Amount- Net carrying amount
Revaluation surplus= 621000- 479000
Revaluation surplus = 142000
Revaluation surplus= Revalued Amount- Net carrying amount
Revaluation surplus= 930000- 691000
Revaluation surplus = 239000
Dear Students Take Ideas from each other and solve yourself.......Assignments are not for getting solutions only....they are NITRO for your study to boost up your thinking capabilities....If you present a self made Solution ....even if it is wrong....u will get some
thnkx so much,,,,,surely will work out,,,,,indeed a great help in study...
please tellme ye revaluation ka formula kese theek hai bhai?
Revaluation surplus= Revalued Amount- Net carrying amount
asal formula tou asset - income hai
on the bok the formula is according to book (524,000* 479,000/621000) = 404180.354
this is the differnt ans
i am confused>?
Objective of IAS 16
The objective of IAS 16 is to prescribe the accounting treatment for property, plant, and equipment. The principal issues are the recognition of assets, the determination of their carrying amounts, and the depreciation charges and impairment losses to be recognised in relation to them.
IAS 16 applies to the accounting for property, plant and equipment, except where another standard requires or permits differing accounting treatments, for example:
assets classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations biological assets related to agricultural activity accounted for under IAS 41 Agriculture
exploration and evaluation assets recognised in accordance with IFRS 6 Exploration for and Evaluation of Mineral Resources mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative resources.
The standard does apply to property, plant, and equipment used to develop or maintain the last three categories of assets. [IAS 16.3]
The cost model in IAS 16 also applies to investment property accounted for using the cost model under IAS 40 Investment Property. [IAS 16.5]
The standard does apply to bearer plants but it does not apply to the produce on bearer plants. [IAS 16.3]
Note: Bearer plants were brought into the scope of IAS 16 by Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41), which applies to annual periods beginning on or after 1 January 2016.
Items of property, plant, and equipment should be recognised as assets when it is probable that: [IAS 16.7]
it is probable that the future economic benefits associated with the asset will flow to the entity, and the cost of the asset can be measured reliably.
This recognition principle is applied to all property, plant, and equipment costs at the time they are incurred. These costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it.
IAS 16 does not prescribe the unit of measure for recognition – what constitutes an item of property, plant, and equipment. [IAS 16.9] Note, however, that if the cost model is used (see below) each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately. [IAS 16.43]
IAS 16 recognises that parts of some items of property, plant, and equipment may require replacement at regular intervals. The carrying amount of an item of property, plant, and equipment will include the cost of replacing the part of such an item when that cost is incurred if the recognition criteria (future benefits and measurement reliability) are met. The carrying amount of those parts that are replaced is derecognised in accordance with the derecognition provisions of IAS 16.67-72. [IAS 16.13]
Also, continued operation of an item of property, plant, and equipment (for example, an aircraft) may require regular major inspections for faults regardless of whether parts of the item are replaced. When each major inspection is performed, its cost is recognised in the carrying amount of the item of property, plant, and equipment as a replacement if the recognition criteria are satisfied. If necessary, the estimated cost of a future similar inspection may be used as an indication of what the cost of the existing inspection component was when the item was acquired or constructed. [IAS 16.14]
An item of property, plant and equipment should initially be recorded at cost. [IAS 16.15] Cost includes all costs necessary to bring the asset to working condition for its intended use. This would include not only its original purchase price but also costs of site preparation, delivery and handling, installation, related professional fees for architects and engineers, and the estimated cost of dismantling and removing the asset and restoring the site (see IAS 37 Provisions, Contingent Liabilities and Contingent Assets). [IAS 16.16-17]
If payment for an item of property, plant, and equipment is deferred, interest at a market rate must be recognised or imputed. [IAS 16.23]
If an asset is acquired in exchange for another asset (whether similar or dissimilar in nature), the cost will be measured at the fair value unless (a) the exchange transaction lacks commercial substance or (b) the fair value of neither the asset received nor the asset given up is reliably measurable. If the acquired item is not measured at fair value, its cost is measured at the carrying amount of the asset given up. [IAS 16.24]
Measurement subsequent to initial recognition
IAS 16 permits two accounting models:
Cost model. The asset is carried at cost less accumulated depreciation and impairment. [IAS 16.30] Revaluation model. The asset is carried at a revalued amount, being its fair value at the date of revaluation less subsequent depreciation and impairment, provided that fair value can be measured reliably. [IAS 16.31]
The revaluation model
Under the revaluation model, revaluations should be carried out regularly, so that the carrying amount of an asset does not differ materially from its fair value at the balance sheet date. [IAS 16.31]
If an item is revalued, the entire class of assets to which that asset belongs should be revalued. [IAS 16.36]
Revalued assets are depreciated in the same way as under the cost model (see below).
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" unless it represents the reversal of a revaluation decrease of the same asset previously recognised as an expense, in which case it should be recognised in profit or loss. [IAS 16.39]
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. [IAS 16.40]
When a revalued asset is disposed of, any revaluation surplus may be transferred directly to retained earnings, or it may be left in equity under the heading revaluation surplus. The transfer to retained earnings should not be made through profit or loss. [IAS 16.41]
Depreciation (cost and revaluation models)
For all depreciable assets:
The depreciable amount (cost less residual value) should be allocated on a systematic basis over the asset's useful life [IAS 16.50].
The residual value and the useful life of an asset should be reviewed at least at each financial year-end and, if expectations differ from previous estimates, any change is accounted for prospectively as a change in estimate under IAS 8. [IAS 16.51]
The depreciation method used should reflect the pattern in which the asset's economic benefits are consumed by the entity [IAS 16.60]; a depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriate. [IAS 16.62A]
Note: The clarification regarding the revenue-based depreciation method was introduced by Clarification of Acceptable Methods of Depreciation and Amortisation, which applies to annual periods beginning on or after 1 January 2016.
The depreciation method should be reviewed at least annually and, if the pattern of consumption of benefits has changed, the depreciation method should be changed prospectively as a change in estimate under IAS 8. [IAS 16.61] Expected future reductions in selling prices could be indicative of a higher rate of consumption of the future economic benefits embodied in an asset. [IAS 16.56]
Note: The guidance on expected future reductions in selling prices was introduced by Clarification of Acceptable Methods of Depreciation and Amortisation, which applies to annual periods beginning on or after 1 January 2016.
Depreciation should be charged to profit or loss, unless it is included in the carrying amount of another asset [IAS 16.48].
Depreciation begins when the asset is available for use and continues until the asset is derecognised, even if it is idle. [IAS 16.55]
Recoverability of the carrying amount
IAS 16 Property, Plant and Equipment requires impairment testing and, if necessary, recognition for property, plant, and equipment. An item of property, plant, or equipment shall not be carried at more than recoverable amount. Recoverable amount is the higher of an asset's fair value less costs to sell and its value in use.
Any claim for compensation from third parties for impairment is included in profit or loss when the claim becomes receivable. [IAS 16.65]
Derecognition (retirements and disposals)
An asset should be removed from the statement of financial position on disposal or when it is withdrawn from use and no future economic benefits are expected from its disposal. The gain or loss on disposal is the difference between the proceeds and the carrying amount and should be recognised in profit and loss. [IAS 16.67-71]
If an entity rents some assets and then ceases to rent them, the assets should be transferred to inventories at their carrying amounts as they become held for sale in the ordinary course of business. [IAS 16.68A]
Information about each class of property, plant and equipment
For each class of property, plant, and equipment, disclose: [IAS 16.73]
basis for measuring carrying amount depreciation method(s) used useful lives or depreciation rates gross carrying amount and accumulated depreciation and impairment losses reconciliation of the carrying amount at the beginning and the end of the period, showing:
additions disposals acquisitions through business combinations revaluation increases or decreases impairment losses reversals of impairment losses depreciation net foreign exchange differences on translation other movements
The following disclosures are also required: [IAS 16.74]
restrictions on title and items pledged as security for liabilities expenditures to construct property, plant, and equipment during the period contractual commitments to acquire property, plant, and equipment compensation from third parties for items of property, plant, and equipment that were impaired, lost or given up that is included in profit or loss.
IAS 16 also encourages, but does not require, a number of additional disclosures. [IAS 16.79]
Revalued property, plant and equipment
If property, plant, and equipment is stated at revalued amounts, certain additional disclosures are required: [IAS 16.77]
the effective date of the revaluation whether an independent valuer was involved for each revalued class of property, the carrying amount that would have been recognised had the assets been carried under the cost model the revaluation surplus, including changes during the period and any restrictions on the distribution of the balance to shareholders.