very quick question on financial accounting problem? be really appreciated

markg86

I'm kinda stuck on revaluation reserve with just one figure. where does the transfer come from, I thought it was the difference in deprecation amounts but that wouldn't make sense here. as depr one is 150000 and two is 120000.

basically This is the workings from my solutions on how to find the impairment on a building, but I cant figure out where the transfer figure comes from.

(figures below)

Building

Purchased Jan 02 2,000,000
NBV at Dec 04 1,850,000 (3year depr at 50k)
Valued at Dec 04 2,220,000
Increase in value 370,000
2nd Revalue NBV 2,100,000 (1year depr 120k)
Valued at 1,682,000

Deval 418,000
Reval Reser
Created from Reval 1 370,000
Transfer -20000
Bal at 2nd reval 350000
Impairment to IE 68000

emailed my lecturer but shes off on holidays got automatic response thingy

Cheers,

smeharg

You're looking at the wrong depreciation figures.

Depreciation charge after 1st reval =(2,220/18.5)=120
Depreciation charge that would have been charged on carrying amount at 1st reval =(1,850/18.5)=100
Diff, ie transfer amount =(120-100)=20

I would've thought the transfer amount would have been calculated on the original cost (not carrying value at revaluation), as per the standard:

"the amount of the surplus transferred would be the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the asset's original cost"

but as IFRS is not my speciality so I'll leave it open to the floor.

markg86

thanks for the reply,

can you tell me where the 18.5 comes form/

smeharg

markg86 wrote: »

thanks for the reply,

can you tell me where the 18.5 comes form/

It looks like it's being depreciated over 18.5 years, which seems strange especially as the first 3 years depn were over 40 years. Perhaps there's more info in the question?

markg86

ok thanks a mill,,