Property Plant and Equipment

Revaluation Model
 The asset is carried at a revalued amount, being its fair value at the date to the
revaluation less any subsequent accumulated depreciation and subsequent
accumulated impairment losses.
 If an item is revalued, the entire class of assets to which that asset belongs
should be revalued.

Determine Fair Value

Land and Building- usually determined from market- based evidence by appraisal that is
normally undertaken by professionally qualified valuers.
 Items of plant and equipment- usually determined by appraisal.
 If there is mo market-based evidence of fair value because of the specialized
nature of the item of PPE and the item is rarely sold, except as part of a
continuing business, an entity may need to estimate fair value using an income
or a depreciated replacement cost approach.

How often assets should be revalued

 Revaluations shall made the sufficient regularity to ensure that the carrying
amount does not differ materially from that which would be determined using fair
value at the end of the reporting period.
 The frequency of revaluation depends upon the changes in fair values of the
items of PPE being revalued.
 When the fair value of a revalued asset differs materially from its carrying
amount, a further revaluation is required.
 Some items of PPE experience significant and volatile changes in fair value, thus
necessitating annual revaluation.
 Such frequent revaluations are unnecessary for items of PPE with only
insignificant changes in fair value. Instead, it may be necessary to revalue the
item only every three years.

Accounting for Revaluation Increase

Not previously impaired
 Recognized in OCI and accumulated in equity under the heading of revaluation
surplus.

Previously impaired:
 Reversal of impairment loss recognized in P/L
 Excess recognized in OCI

Accounting for Revaluation Decrease

Not previously revalued:
 Recognized in P/L as revaluation loss
Previously revalued:
 Recognized in OCI to the extent of any credit balance existing in the revaluation
surplus in respect of that asset
 Excess recognized in P/L
Realized Revaluation Surplus
Maybe transferred directly to retained earnings, or
It may be left in equity under the heading revaluation surplus.
The transfer to retained earnings dhould not be made through profit or loss

- done –
REVIEW QUESTIONS
REVIEW QUESTION: MULTIPLE CHOICE PROBLEMS
Use the following information for the next two question.
Tyke Corporation has the P20,000,000
following information on
January 1, 2016 relating to its
land and building. Land
Building 450,000,000
Accumulated depreciation 75,000,000