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FAR OCAMPO/OCAMPO
FAR.3207-Property, Plant and Equipment – Revaluation Model MAY 2022

DISCUSSION PROBLEMS
1. Under the revaluation model, an item of property,
plant and equipment whose fair value can be
measured reliably shall be carried at a revalued
amount. Revalued amount means
a. Fair value at the date of the revaluation.
b. Fair value at the date of the revaluation less any
accumulated depreciation and any accumulated
impairment losses.
c. Fair value at the date of the revaluation less any
subsequent accumulated depreciation and
subsequent accumulated impairment losses.
d. Cost less any accumulated depreciation and
accumulated impairment losses.
2. Which statement is incorrect regarding the revaluation
model?
a. Revaluations shall be made with 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.
b. The frequency of revaluations depends upon the
changes in fair values of the items of property,
plant and equipment being revalued.
c. If an item of property, plant and equipment is
revalued, the entire class of property, plant and
equipment to which that asset belongs shall be
revalued.
d. Appraisal should be made by recognized specialists
independent of the entity which owns the property.
LECTURE NOTES:
Accounting for Revaluation Increase (FV > CA)
No previous revaluation decrease:
• Income in OCI and accumulated in equity as
revaluation surplus
With previous revaluation decrease:
• Income in P/L as reversal of impairment loss
• Excess (over the limit) income in OCI
5. The following pertains to an entity using the
revaluation model for its land belonging to the same
class:
Land A – Acquired in 2019. Revalued at the end of
2022 resulting in revaluation decrease of P3,500,000.
Land B - Acquired in 2016 for P10,000,000. The entity
revalued the land to P12,000,000 at the end of 2019.
The land was revalued again to P9,000,000 at the end
of 2022.
The amount to be recognized in 2022 profit or loss is
a. P6,500,000 c. P4,500,000
b. P5,500,000 d. P3,500,000
LECTURE NOTES:
Accounting for Revaluation Decrease (FV < CA)

3. Annual revaluation is required for items of property, No existing revaluation surplus:

plant and equipment • Expense in P/L as revaluation loss
a. That experience significant and volatile changes in
fair value. With existing revaluation surplus:
b. When fair value differs materially from its carrying • Expense in OCI to the extent of any credit balance
amount. existing in the revaluation surplus in respect of that
c. With only insignificant changes in fair value. asset
d. In all cases. • Excess is expense in P/L as revaluation loss

4. The following pertains to an entity using the Use the following information for the next seven questions.
revaluation model for its land belonging to the same
class: On Dec. 31, 2021, the statement of financial position of
Twitter Corporation showed the following property and
Land A – Acquired in 2019. Revalued at the end of equipment after charging depreciation:
2022 resulting in revaluation increase of P3,000,000.
Building P3,000,000
Land B - Acquired in 2016. Revalued at the end of Accumulated depreciation (1,000,000) P2,000,000
2022 resulting in revaluation increase of P2,000,000.
The entity previously recognized revaluation decrease Equipment 1,200,000
of P1,500,000 in profit or loss at the end of 2019. Accumulated depreciation (400,000) 800,000

The balance of revaluation surplus at the end of 2022 The entity has adopted the revaluation model for the
is valuation of property and equipment. This has resulted in
a. P5,000,000 c. P3,500,000 the recognition in prior periods of an asset revaluation
b. P4,500,000 d. P3,000,000 surplus for the building of P140,000. The entity does not
make a transfer to retained earnings in respect of realized
revaluation surplus.

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EXCEL PROFESSIONAL SERVICES, INC.

On Dec. 31, 2021, an independent valuer assessed the fair Use the following information for next two questions.
value of the building to be P1,600,000 and the equipment
Tyke Corporation has the following information on Jan. 1,
to be P900,000. The building and equipment had
2022 relating to its land and building.
remaining useful lives of 25 years and 4 years,
respectively, as of that date. Land P 20,000,000
Building 450,000,000
6. The amount to be recognized in profit or loss for 2021 Accumulated depreciation 75,000,000
related to the revaluation of property and equipment is
a. P100,000 c. (P260,000) There were no additions or disposals during 2022.
b. (P160,000) d. (P300,000) Depreciation is computed using straight line method over
15 years for building. On June 30, 2022, the land and
7. When an item of property, plant and equipment is building were revalued as follows:
revalued, any accumulated depreciation at the date of
the revaluation is Replacement cost
a. Adjusted to equal the difference between the Land P 35,000,000
restated gross carrying amount and the carrying Building 600,000,000
amount of the asset after taking into account
accumulated impairment losses. 14. The depreciation expense for the year 2022 is
b. Eliminated against the gross carrying amount of a. P35 million c. P30 million
the asset. b. P40 million d. P32 million
c. Either a or b.
d. Neither a nor b. 15. If the entity transfers realized revaluation surplus to
retained earnings, the revaluation surplus as of Dec.
8. How much is the total balance of accumulated 31, 2022 is
depreciation at Dec. 31, 2021, if the entity adjusted it a. P135 million c. P130 million
to equal the difference between the restated gross b. P125 million d. P127 million
carrying amount and the carrying amount of the asset
after taking into account accumulated impairment
16. Tycoon Corporation acquired a building on Jan. 1, 2018
losses?
at a cost of P50,000,000. The building has an
a. P0 c. P1,650,000
estimated life of 10 years and residual value of
b. P1,250,000 d. P2,450,000
P5,000,000. The building was revalued on Jan. 1, 2022
to P41,600,000 with a residual value of P2,000,000
9. Depreciation, if applicable, is recognized under
and revised total life of 12 years. The carrying amount
Cost Model Revaluation Model of building as of Dec. 31, 2022 is
a. Yes Yes a. P41,600,000 c. P36,400,000
b. Yes No b. P36,650,000 d. P34,650,000
c. No Yes
d. No No 17. During the current year an entity sold a piece of
equipment used in production. The equipment had
10. The carrying amount of property and equipment as of been accounted for using the revaluation method and
Dec. 31, 2022 is details of the accounts and sale are presented below:
a. P2,500,000 c. P2,080,000
b. P2,400,000 d. P2,211,000 Sales price P100,000
Equipment carrying amount (net) 90,000
11. Which statement is incorrect regarding ‘realized’ Revaluation surplus 20,000
revaluation surplus? Which of the following is correct regarding recording
a. It may be transferred directly to retained earnings. the sale?
b. It may be left in equity under the heading a. The gain that should be recorded in profit and loss
revaluation surplus. is P30,000
c. The transfer to retained earnings can be made b. The gain that should be recorded in other
through profit or loss. comprehensive income is P10,000
d. None, all the statements are correct. c. The gain that should be recorded in other
comprehensive income is P30,000
12. The revaluation surplus as of Dec. 31, 2022 is d. The gain that should be recorded in profit and loss
a. P140,000 c. P75,000 is P10,000; the P20,000 revaluation surplus may
b. P100,000 d. P 0 be transferred to retained earnings.

13. PFRS 13 defines fair value as current exit price,
whereas depreciated replacement cost measures the
entry price for an asset. In accordance with PIC Q&A
No. 2018-3, when can depreciated replacement cost be
used to measure the fair value of an item of property,
plant and equipment?
a. Only when the entry price equals a current exit
price.
b. Only when the entry price is lower than a current
exit price.
c. Under no circumstances.
d. In all circumstances.
18. If items of property, plant and equipment are stated at
revalued amounts, the following shall be disclosed
except
a. Whether an independent valuer was involved.
b. For each revalued class of property, plant and
equipment, the carrying amount that would have
been recognized had the assets been carried under
the cost model.
c. The revaluation surplus, indicating the change for
the period and any restrictions on the distribution
of the balance to shareholders.
d. The expected date of the next revaluation.
J - end of FAR.3207 - J

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