Question on IAS 16 PPE

[lincs]

Quick question for you Steve, or anybody else that can answer it.

If youre using the revaluation model with international standards, then if you revalue an item you will end up with an amount in the revaluation surplus. (i.e. revaluation reserve, which is a capital reserve and thus not distibutable as profits)

Bearing this in mind is the following assumption true:

"When as asset is sold its profit/loss on disposal is taken to the income statement as normal, and any past revaluation amounts sitting in the revaluation surplus are moved directly to retained profits and not via the income statement"

[peugeot]

Hi Lincs,

Sorry for the delay in replying. My laptop is still broke. Hopefully be back to normal next week.

You've probably found the answer by now but yes, in theory, the IAS is correct. The reason that the revaluation surplus/deficit is offset against the reserves is because revaluations are never realised i.e. monetary assets incoming. When you dispose of a fixed asset you know that the NBV of it together with the disposal proceeds form the profit/loss on disposal. With revaluations, they are only a reserve account, so on the sale, any revaluation adjustments including depreciation adjustments on revaluation, need to be sent to reserves and not the P&L (or income statement as it is now known).

I hope that helps. ONce again, sorry for the delay I can only access the site as and when time allows. Hopefully my computer is going to be fixed next week and we can get back to normal.

Regards
Ste