Prepared by

International standards for

financial reporting
Chapter 11 - Depreciation, Impairments, and Depletion
 FCES Students’ Council IFRS - chapter 11

‫هو ر‬.. property, plant and equipment ‫ ل‬revaluation ‫الشابت ده هتعرف ازاي تعمل‬
‫شابت‬ ‫ر‬ ‫ يف‬.. ‫ازيكم ياشباب‬
.‫صغت وان شاء هللا تفهموه‬
‫ر‬
Recognizing Revaluations
Companies may value long-lived tangible assets subsequent to acquisition at cost or fair
value.
 Change in the fair value accounted for by adjusting the asset account and
establishing an unrealized gain.
 Unrealized gain is often referred to as revaluation surplus and reported as part of
other comprehensive income.
‫تشتي ارض مثال وسعرها زاد بعد ما ر‬
‫ مش‬fair value ‫اشتتها ك‬ ‫وهو اما تيج ر‬.. revaluation ‫هنبدأ نعرف يعن ايه‬
‫ي‬ ‫ي‬
GAAP ‫ بتسمح بيه عادي عكس ال‬IFRS ‫ وال‬revaluation ‫يبق ده اسمه‬ ‫ يعن اهو قيمتها اتغتت ر‬historical cost
‫ي‬ ‫ر‬ ‫ي‬
‫ وطبعا يف ال‬other comprehensive income ‫ وتحطها يف ال‬unrealized gain ‫بس خد بالك الزيادة ديه اسمها‬
.‫ مش هيتأثر‬net income ‫ وال‬accumulated other comprehensive income
‫ر‬
‫وهتبق‬ N.I ‫ وتحطها‬loss on impermeant ‫الخسارة ديه اسمها‬.. ‫طب لو حصل العكس وقيمة األرض ديه قلت‬
‫ي‬
.‫ يقل‬return earnings ‫ وال‬expense

Revaluation Issues
Company can select to value only one class of assets, say buildings, and not revalue other
assets such as land or equipment.
If a company selects only buildings,
• revaluation applies to all assets in that class of assets.
• A class of assets is a grouping of items that have a similar nature and use in a
company’s operations.
• Companies must also make every effort to keep the assets’ values up to date.

‫االتني‬
‫ر‬ ‫الزم‬.. historical cost ‫ والتانية بال‬fair value ‫قطعتي ارض مينفعش واحدة اسجلها ب‬
‫ر‬ ‫ر‬
‫دلوقن انا لو عندي‬
‫ي‬
‫ر‬ ‫ر‬
F.V ‫تبق ب‬
‫بق واحدة فيهم ي‬ ‫عادي ي‬..‫ ؟‬land & building ‫طب لو عندي‬... class‫يبقوا نفس بعض عشان نفس ال‬
. historical ‫والتانية بال‬

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 FCES Students’ Council IFRS - chapter 11

L.O.7 Illustrate revaluation accounting procedures.

Revaluation of Property, Plant, and Equipment
The general rules for revaluation accounting are as follows.
 When a company revalue its long-lived tangible assets above historical cost, it reports an
unrealized gain that increases other comprehensive income and increases accumulated
other comprehensive income.

historical ‫ زادت عن ال‬assets‫ان لو قيمة ال‬...‫نمش عليها‬ ‫ الزم‬rules ‫ فيه شوية‬revaluation ‫بق‬‫ر‬
‫ي‬ ‫عشان نعمل ي‬
.‫الل قولته يف االول‬
‫ نفس ي‬other C.I ‫ ويزود ال‬unrealized gain ‫هيجيل‬
‫ي‬
1. If a company experiences a loss on impairment (decrease of value below historical
cost), the loss reduces income and retained earnings. Thus, gains on revaluation
increase equity but not net income.

‫الخسارة‬.. loss impairment ‫تان سنة‬

‫ وجه يف ي‬unrealized return earnings ‫اول حاجة لو حصل يف اول سنة‬
.net income ‫ مش‬equity ‫ الن دورها انها ربتود ال‬unrealized ‫ديه بعوضها من ال‬
2. If a revaluation increase reverses a decrease that was previously reported as an
impairment loss, a company credits the revaluation increase to income using the
account Recovery of Impairment Loss up to the amount of the prior loss. Any
additional valuation increase above historical cost increases other comprehensive
income and is credited to Unrealized Gain on Revaluation.

‫ يف الحالة ديه هنعمل حاجة اسمها‬unrealized ‫الل بعدها‬

‫ وبعدين جت السنة ي‬loss ‫تان حاجة بس كان عندنا‬
‫ي‬
‫ر‬
.‫ وهنفهمها اكت مع األسئلة‬Recovery of Impairment Loss
3. If a revaluation decrease reverses an increase that was reported as an unrealized
gain, a company first reduces other comprehensive income by eliminating the
unrealized gain. Any additional valuation decrease reduces net income and is
reported as a loss on impairment.

.‫الل شحنها فوق‬

‫ ي‬cases ‫تالت حاجة عكس ال‬
Revaluation of Land
Revaluation—2022: Valuation Increase
Assume that Unilever Group (GBR and NLD) purchased land on January 1, 2022, that cost
€400,000. Unilever decides to report the land at fair value in subsequent periods. At
December 31, 2022, an appraisal of the land indicates that its fair value is €520,000.
Unilever makes the following entry to record the increase in fair value.

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 FCES Students’ Council IFRS - chapter 11

Land 120,000

Unrealized Gain on Revaluation — Land 120,000

(€520,000 − €400,000)

• Land is now reported at its fair value of €520,000.

• The increase in the fair value of €120,000 is reported on the statement of
comprehensive income.
• The ending balance in Unrealized Gain on Revaluation—Land is reported as
accumulated other comprehensive income in the statement of financial position in
the equity section.
‫ر‬
‫ يف ال‬unrealized gain ‫يبق هيحصل‬
‫ ي‬520,000 ‫ بقت‬400,000 ‫يف السؤال ده قالك ان قيمة األرض كانت ب‬
‫ وطبعا ر‬120,000 ‫ ب‬credit
.AOCI ‫هيبق موجود يف‬
‫ي‬
Revaluation—2023: Decrease below Historical Cost
What happens if the land’s fair value at December 31, 2023, is €380,000, a decrease of
€140,000 (€520,000 − €380,000)? In this case, the land’s fair value is below its historical
cost. Unilever makes the following entry on December 31, 2023 to record the decrease in
fair value of the land.

Unrealized Gain or Revaluation — Land120,000

Loss on Impairment (Land) 20,000

Land (€520,000 − €380,000) 140,000

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 FCES Students’ Council IFRS - chapter 11

• The decrease to Unrealized Gain on Revaluation—Land of €120,000 reduces other

comprehensive income, which reduces accumulated other comprehensive income.
• The debit to Loss on Impairment of €20,000 reduces net income and retained
earnings.

‫ بعد ما كان‬140,000 ‫ او خفض يف القيمة ب‬impairment loss ‫الل بعدها‬

‫طيب يف السؤال ده لو حصل يف السنة ي‬
‫ فا انت هتستخدمها يف‬120,000 ‫انت كان عندك أرباح ب‬.. ‫نفكر براحة ومتترسعش‬..520,000 ‫ب‬historical ‫ال‬
‫ر‬
.debit ‫ يف ال‬20.000 ‫الباف معاك خسارة‬
‫سد الخسارة ديه فا ي‬
Revaluation—2024: Recovery of Impairment Loss
At December 31, 2024, Unilever’s land value increases to €415,000, an increase of €35,000
(€415,000 − €380,000). In this case, the Loss on Impairment of €20,000 is reversed and the
remaining increase of €15,000 is reported in other comprehensive income. Unilever makes
the following entry to record this transaction.

Land 35,000

Unrealized Gain on Revaluation — Land 15,000

Recovery of Impairment 20,000

‫ وانت‬415,000 ‫حصل يف السنة الجديدة ارتفاع يف القيمة ب‬...‫دلوقن كتت وعرفت تحلها ازاي وانا هساعدك‬‫ر‬ ‫انت‬
‫ي‬
‫ وخليك مركز انت كان عندك‬35,000‫يبق فيه ارباح ب‬ ‫ر‬
‫ ي‬380,000 ‫الل فاتت‬ ‫كان عندك اخر قيمة من السنة ي‬
.15,000 ‫ ب‬Unrealized Gain ‫باف‬ ‫ر‬ ‫ر‬
‫هيبق ي‬
‫ي‬ ‫ ف‬recovery ‫ الزم تقفلها او تعملها‬20,000 ‫ ب‬impairment loss
2025 Journal Entries for Sale of Land
On January 2, 2025, Unilever sells the land for €415,000. Unilever makes the following entry
to record this transaction.

January 2,2025
Cash 415,000
Land 415,000
(To record sale of land)
.‫بس هتحتاج تقفل كل حسابتها‬... ‫األختة عادي‬ ‫ر‬
‫بق السنة ديه تبيعها بقيمتها‬
‫ر‬ ‫جيت ي‬

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 FCES Students’ Council IFRS - chapter 11

• In this case, Unilever does not record a gain or loss because the historical cost of the land
is the same as its fair value. Since the land is sold, Unilever will transfer Accumulated
Other Comprehensive Income (AOCI) to Retained Earnings.

Accumulated Other Comprehensive Income 15,000

Retained Earnings 15,000

(To eliminate the remaining balance in AOCI)

‫هنا هتفهمن ر‬
‫انت عندك اخر حاجة يف‬.. positive or zero ‫طالما يف رصيد بعد ما بعت الزم تقفله برقم‬... ‫اكت‬ ‫ي‬
. R.E ‫ هتقفلها عادي يف‬15,000 AOCI
• The purpose of this transfer is to eliminate the unrealized gain on the land that was
sold.
• Transfers from Accumulated Other Comprehensive Income cannot increase net
income.
• This last entry illustrates why revaluation accounting is not popular.
• Even though the land has appreciated in value by €15,000, Unilever is not able to
recognize this gain in net income over the periods that it held the land.

.depreciable assets ‫هنبدأ يف ال‬... non-depreciable assets ‫الحمدهلل كده خلصنا ال‬

Revaluation of Depreciable Assets

Revaluation—2022: Valuation Increase
‫ يف‬revaluation ‫ الزم اما اعمل‬... ‫ ان قيمتها بتقل مع مرور الزمن‬Depreciable Assets ‫عارفي يف ال‬
‫ر‬ ‫طبعا احنا‬
‫ ومنه نجيب ال‬Accumulated Depreciation ‫ وبعدين‬depreciation ‫اول حاجة احسب ال‬...‫نهاية السنة‬
.‫ وبعدين هنشوف نعمل ايه يف المسألة ديه‬fair value ‫ ومنه نقارنها بال‬carrying value
Assume that Nokia (FIN) purchases equipment for €1,000,000 on January 2, 2022. The
equipment has a useful life of five years, is depreciated using the straight-line method of
depreciation, and its residual value is zero.
Nokia chooses to revalue its equipment to fair value over the life of equipment. On
December 31, 2022, Nokia records depreciation expense of €200,000 (€1,000,000 ÷ 5) as
follows.

Depreciation Expense 200,000

Accumulated Depreciation — Equipment 200,000

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 FCES Students’ Council IFRS - chapter 11

‫عل‬ ‫ر‬ ‫ر‬

‫سني ف انت عادي هتقسم الرقم ي‬‫ ر‬5 useful life ‫ و ال‬1,000,000 ‫ ب‬equipment ‫دلوقن هو قالك انه اشتي‬
‫ي‬
‫ر‬
‫ هنطرح قيمة السنة‬carrying ‫ ومنها ال‬accumulated ‫تبق ال‬
‫ وديه ي‬200,000 ‫السني هيطلع ب‬
‫ر‬ ‫عدد‬
.‫ زي ما وضحلك تحت‬1,000,000‫من ال‬200,000
After this entry, Nokia’s equipment has a carrying amount of €800,000 (€1,000,000 −
€200,000).
Nokia employs an independent appraiser, who determines that the fair value of the
equipment on December 31, 2022, is €950,000. To report the equipment at fair value,
Nokia does the following.
1. Reduces the Accumulated Depreciation—Equipment account to zero.
2. Reduces the Equipment account by €50,000—it then is reported at its fair value of
€950,000.
3. Records an Unrealized Gain on Revaluation— Equipment for the difference between
the fair value and carrying amount of the equipment, or €150,000 (€950,000 −
€800,000). The entry to record this revaluation at December 31, 2022, is:

Accumulated Depreciation — Equipment 200,000

Equipment 50,000

Unrealized Gain or Revaluation — Equipment 150,000

‫ر‬
equipment ‫جه يف اخر السنة قيمة ال‬...800,000 ‫ ب‬carrying value ‫احنا وصلنا لغاية ان ال‬..‫بق‬
‫خليك معايا ي‬
‫ر‬
‫الزم‬.. credit ‫هتبق يف ال‬ unrealized gain ‫ وانت فاكر كويس ان ديه‬150,000 ‫يعن زادت ب‬
‫ي‬ ‫ ي‬950,000 ‫بقت ب‬
‫ر‬
Cr‫ يف ال‬equipment ‫ واقلل ال‬Dr ‫وهتبق يف ال‬ accumulated dep ‫بق اما تحط القيمة الجديدة هلغب ال‬ ‫ر‬
‫ي‬ ‫ي‬
.950,000 ‫ وبقت‬1,000,000‫ عشان كانت ب‬50,000‫ب‬
. 950,000 after ‫لو‬... 800,000 ‫ ب‬carrying value before evaluation ‫خد بالك اما يسألك عن ال‬

• The carrying amount of the asset is now €950,000.

• Nokia reports depreciation expense of €200,000 in the income statement and
Unrealized Gain on Revaluation—Equipment of €150,000 in other comprehensive
income.

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 FCES Students’ Council IFRS - chapter 11

Revaluation—2023: Decrease Below Historical Cost

Assuming no change in the useful life of the equipment, the depreciation expense for Nokia
in 2023 is €237,500 (€950,000 ÷ 4), and the entry to record the depreciation expense on
December 31, 2023 is as follows.

Depreciation Expense 237,500

Accumulated Depreciation — Equipment 237,500

‫هب‬
‫الل ي‬
‫سني مش خمسة ي‬
‫عل ارب ع ر‬‫ وخد بالك هقسمها ي‬950,000 ‫ه‬ ‫الل ي‬
‫هنبدأ نشتغل عادي بالقيمة الجديدة ي‬
return ‫عل‬ ‫ر‬
‫الل فاتت وده بيأثر بالسلب ي‬
‫ وطبعا اكت من السنة ي‬accumulated ‫ وكده جبت ال‬237,500
)€200,000 − €237,500( 37,500 ‫ان اطرح‬ ‫الفاض ياخد من المليان ي‬
‫ي‬ ‫ ف‬earnings
.712,500 ‫ ب‬carrying value ‫اجيب ال‬.. ‫تان حاجة انت حفظت‬
‫ ي‬.
• Under IFRS, Nokia may transfer from AOCI the difference between depreciation
based on the revalued carrying amount of the equipment and depreciation based on
the asset’s original cost to retained earnings.
• Depreciation based on the original cost was €200,000 (€1,000,000 ÷5) and on fair
value is €237,500, or a difference of €37,500 (€237,500 − €200,000). The entry to
record this transfer at December 31, 2023 is as follows.

Accumulated Other Comprehensive Income 37,500

Retained Earnings 37,500

• Before revaluation in 2023, Nokia has the following amounts related to its
equipment.

Nokia determines through an appraisal that the equipment now has a fair value of
€570,000. To report the equipment at fair value, Nokia does the following.
1. Reduces the Accumulated Depreciation—Equipment account of €237,500 to zero.
2. Reduces the Equipment account by €380,000 (€950,000 − €570,000)—it then is
reported at its fair value of €570,000.
3. Reduces Unrealized Gain on Revaluation—Equipment by €112,500, to offset the
balance in the unrealized gain account (related to the revaluation in 2022).
4. Records a loss on impairment of €30,000.

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 FCES Students’ Council IFRS - chapter 11

‫ عشان ديه خسارة‬Cr ‫ يف ال‬380,000 ‫يعن الفرق بينهم‬

‫ ي‬950,000‫ وكانت ب‬570,000 ‫هنا القيمة قلت بقت ب‬
237500 ‫ ب‬Dr ‫ يف ال‬Accumulated Depreciation ‫ان اقفل ال‬ ‫هعمل نفس خطوات المسألة ي‬..
‫الل فاتت وهو ي‬
.Dr ‫ يف ال‬30000‫ هيطلع ب‬142500 ‫ هطرحه من‬112500‫ ب‬AOCI ‫وكان عندي ال‬
Journal Entry to Record Impairment Loss

Accumulated Depreciation — Equipment 237,500

Loss on Impairment 30,000

Unrealized Gain on Revaluation — Equipment112,500

Equipment 380,000

• The carrying amount of the equipment is now €570,000.

• Nokia reports a depreciation expense of €237,500 and an impairment loss of €30,000
in the income statement.
• Nokia reports the reversal of the previously recorded unrealized gain by recording
the transfer to retained earnings of €37,500 and the entry to Unrealized Gain on
Revaluation—Equipment of €112,500.

L.O 8: Compare accounting procedures for property, plant, and equipment

under IFRS and U.S. GAAP.
Global Accounting Insights
U.S. GAAP does not permit revaluations of property, plant, equipment, and mineral
resources. Under IFRS, companies can use either the historical cost model or the
revaluation model.
. IFRS ‫ عكس ال‬revaluation ‫ مش بتسمح بحاجة اسمها‬GAAP ‫طبعا انا قولت النقطة ديه يف األول خالص ان ال‬
.‫ وخالص فاضل تكة‬, ‫الميدتتم‬
‫ر‬ ‫و بكده نكون خلصنا ذاكروا كويس وربنا معانا يف‬

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 FCES Students’ Council IFRS - chapter 11

Mind map

revaluation on non-
depreciable assets
L.O 7Illustrate
revaluation accounting
procedures.
revaluation on
Depreciation, depreciable asset
Impairments, and
Depletion
L.O 8 Compare
accounting procedures
Global Accounting
for property, plant, and
Insights
equipment under IFRS
and U.S. GAAP.

End of Chapter 11, Good luck!

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