73 Asset A was bought for £1,400,000 some years ago and is now valued at £4,500,000. This asset is not depreciated. ‘Asset B was bought for £500,000 five years ago and has been depreciated at 10% on cost pa. Itis ‘now valued at £800,000. There is no change to its useful life. Requirement ‘Show the journals to record the asset revaluations and show the extracts from the statement of financial position for the non-current assets and the revaluation surplus. Solution Asset A £ £ DR Asset A- costvaluation (£4.5m - £1.4m) £3,100,000 CR Revaluation surplus (OCI) £3,100,000 Asset B £ £ DR Asset B - cost/valuation (£800,000 - £500,000) 300,000 DR Asset B - accumulated depreciation (£500,000 x 10% x 5) 250,000 CR Revaluation surplus (OC!) 550,000 ‘Statement of financial position (extract) £ Property, plant and equipment (£4,500,000 + £800,000) 5,300,000 Revaluation surplus (£3,100,000 + £550,000) 3,650,000 Interacti question 5: Revaluation (On 1 January 20X2, an asset has a camying amount of £100,000 and a remaining useful life of 10 years, with anil residual value. The asset is revalued on that date to £50,000 and the loss is recognised in profit or loss. The assetis depreciated straightline over the next ten years, giving a carrying amount of £25,000 at 31 December 20X6. Then, on 1 January 20X7 when the remaining useful life is the unexpired five years, the asset is revalued to £60,000. Requirement State how much of the revaluation surplus on 1 January 20X7 is recognised in other comprehensive income and how much is recognised in profit or loss See Answer at the end of this chapter. Decreases in value The basic rule is that decreases in value on a revaluation are recognised as an expense and charged to profit or loss. ‘The exception is where such a decrease reverses an earlier revaluation increase on the same asset that was recognised in other comprehensive income and is held in the revaluation surplus, then the deficit should be recognised in other comprehensive income, but only to the extent of the previous increase. ICAEW 2022 4 Propery.plantand equipment 205