1 Introduction to published accounts Chapter learning objectives

Show the relevant extracts from the financial statements at 31 December 20X8. Solution The relevant extracts from the financial statements at 31 December 20X8 are as follows: Statement of profit or loss and other comprehensive income (extract) $000 Depreciation (W1) (35) Other comprehensive income: Gain on revaluation (W1) 344 Statement of financial position (extract) $000 Non-current assets Land and buildings (W1) 1,365 Equity Revaluation surplus (SOCIE) 344

KAPLAN PUBLISHING 33

Tangible non-current assets

_{Statement of changes in equity (extract)}
Revaluation
surplus
$000
1 January 20X8 b/f –
Revaluation gain (W1) 344
––––
31 December 20X8 c/f 344
––––
(W1) PPE Note
Land and buildings $000
1 January 20X8 1,056
Revaluation (β) 344
–––––
Valuation 1,400
Depreciation (1,400/40 years) (35)
–––––
31 December 20X8 1,365
–––––

Depreciation of revalued assets
Once an asset has been revalued the following treatment is required.
 Depreciation must be charged, based on valuation less residual value,
over the remaining useful life of the asset
 The whole charge must go to the statement of profit or loss for the year.
 An annual reserves transfer may be made, from revaluation surplus to
retained earnings, for the additional depreciation charged on the revalued
amount compared to cost. This permitted treatment under IAS 16 is to
address the imbalance between a non-distributable gain held in
revaluation surplus and the reduction in retained earnings due to the
increased depreciation charge.
 This transfer would be shown on the SOCIE.