1 Introduction to published accounts Chapter learning objectives

Calculate the annual depreciation charge for the years 1–5 and years 6–10. Solution The aircraft is treated as two separate components for depreciation purposes: Years 1–5 $m Initial overhaul value $5m depreciated over 5 years 1 Balance of $20m depreciated over 20 years 1 ––– Depreciation charge per annum 2 When the first overhaul is completed at the end of year 5 at a cost of, say, $6 million, then this cost is capitalised and depreciated to the date of the next overhaul: Years 6–10 $m Overhaul $6m depreciated over 5 years 1.2 Aircraft depreciation 1.0 ––– Depreciation charge per annum 2.2

3 Revaluation of non-current assets
IAS 16 treatments
IAS 16 allows a choice of accounting treatment for property, plant and
equipment:
 the cost model
 the revaluation model.
The cost model
Property, plant and equipment should be valued at cost less accumulated
depreciation.
The revaluation model
Property, plant and equipment may be carried at a revalued amount less any subsequent accumulated depreciation.

KAPLAN PUBLISHING 31

Tangible non-current assets

If the revaluation alternative is adopted, two conditions must be complied with:  Revaluations must subsequently be made with sufficient regularity to

ensure that the carrying amount does not differ materially from the fair
value at each reporting date.
 When an item of property, plant and equipment is revalued, the entire
class of assets to which the item belongs must be revalued.

^{Accounting for a revaluation}
Steps:
(1) Restate asset's cost to the new valuation.
(2) Eliminate any existing accumulated depreciation for the asset.
(3) Show the total increase in Other Comprehensive Income, at the foot of the
statement of profit or loss. This would then be taken to the revaluation
surplus (much like the profit for the year gets taken to retained earnings).