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  • (Notes) MFRS116 Revaluation On Depreciable PPE

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    NUR HASWANIE MOHD SALMI
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    The document discusses the accounting treatment for subsequent measurement of property, plant, and equipment (PPE) that is revalued. It provides details on calculating any surplus or deficit arising from revaluation, and the journal entries to record the revaluation, annual depreciation, and realization of revaluation surplus. An illustration is also included showing the journal entries for a building that was revalued upward in 2018 and then sold in 2019.

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    [Notes] MFRS116 Revaluation on Depreciable PPE

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    The document discusses the accounting treatment for subsequent measurement of property, plant, and equipment (PPE) that is revalued. It provides details on calculating any surplus or deficit arising from revaluation, and the journal entries to record the revaluation, annual depreciation, and realization of revaluation surplus. An illustration is also included showing the journal entries for a building that was revalued upward in 2018 and then sold in 2019.

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    © All Rights Reserved
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    5 views3 pages

    (Notes) MFRS116 Revaluation On Depreciable PPE

    Uploaded by

    NUR HASWANIE MOHD SALMI
    The document discusses the accounting treatment for subsequent measurement of property, plant, and equipment (PPE) that is revalued. It provides details on calculating any surplus or deficit arising from revaluation, and the journal entries to record the revaluation, annual depreciation, and realization of revaluation surplus. An illustration is also included showing the journal entries for a building that was revalued upward in 2018 and then sold in 2019.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 3

    MFRS 116 PPE

    Subsequent Measurement: Revaluation on Depreciable PPE

    No Details and calculation Journal entry


    1 Compare carrying amount and fair to record depreciation (if necessary)
    value
    Dr. Depreciation expense
    Cr. Accumulated depreciation
    - Calculate carrying amount on
    the date of revaluation To record elimination of accumulated depreciation
    against PPE account

    Dr. Accumulated depreciation


    Cr. PPE
    2 Identify surplus or deficit To record deficit To record surplus

    - The FV will be deemed as the Dr. SOPL Dr. PPE


    new carrying amount Cr. PPE Cr. ARR/OCI
    3 The end of the year or the following to record depreciation
    year
    Dr. Depreciation expense
    Amount of new depreciation Cr. Accumulated depreciation
    = (FV – residual value) ÷ RUL

    RUL is determined on the date of


    revaluation
    4 The end of the year or the following To record realisation
    year
    Dr. ARR
    Amount of realisation Cr. RE
    = ARR balance ÷ RUL

    Illustration 2

    FF Bhd purchased building at a cost of RM16 million in January 2016. The building was depreciated
    on a straight-line method over 50 years. On 1 January 2018, the building was revalued upward. An
    independent professional valuer placed a valuation of RM18 million. On 31 December 2019, the
    building was sold for RM16 million cash. FF Bhd closes its accounts on 31 December each year.

    Required:

    a. Calculate any surplus or deficit on revaluation arising of the building in 2018.


    b. Show the journal entries to incorporate the revaluation on 1 January 2018.
    c. Show the relevant journal entries on 31 December 2018.
    d. Show the journal entries to record the disposal on 31 December 2019.
    Answer

    a. Calculate any surplus or deficit on revaluation arising of the building in 2018.

    Date Details RM
    01.01.2016 Cost 16,000,000
    31.12.2017 Less: Accumulated depreciation (16m ÷ 50 × 2) 640,000
    31.12.2017 Carrying amount 15,360,000
    01.01.2018 Fair value 18,000,000
    01.01.2018 Surplus on revaluation 2,640,000

    b. Show the journal entries to incorporate the revaluation on 1 January 2018.

    Debit Credit
    Dr. Accumulated depreciation 640,000
    Cr. PPE / Building 640,000

    Dr. PPE / Building 2,640,000


    Cr. ARR/OCI 2,640,000

    c. Show the relevant journal entries on 31 December 2018.

    On the date of revaluation, the remaining useful life (RUL) is 48 years.

    Debit Credit
    Dr. SOPL / Depreciation expense [(18m – 0) ÷ 48] 375,000
    Cr. Accumulated depreciation 375,000

    Dr. ARR (2,640,000 ÷ 48) 55,000


    Cr. RE 55,000

    d. Show the journal entries to record the disposal on 31 December 2019.

    Date Details RM
    01.01.2018 Revalued amount 18,000,000
    31.12.2019 Less: Accumulated depreciation (18m ÷ 48 × 2) 750,000
    31.12.2019 Carrying amount 17,250,000
    31.12.2019 Sales proceed 16,000,000
    31.12.2019 Loss on disposal 1,250,000

    Debit Credit
    Dr. SOPL / Depreciation expense [(18m – 0) ÷ 48] 375,000
    Cr. Accumulated depreciation 375,000

    Dr. ARR (2,640,000 – 55,000) 2,585,000


    Cr. RE 2,585,000

    Dr. Cash 16,000,000


    Dr. Accumulated depreciation 750,000
    Dr. SOPL / Loss on disposal 1,250,000
    Cr. PPE / Building 18,000,000
    Homework:
    December 2019: Question 1 (d)
    June 2019: Question 1 (d) (i) & (ii)
    June 2018: Question 1 (c)
    January 2018: Question 1 (c)

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