Solution 1

Omega Limited
Notes to Financial statements
For the year ended 31 December 2017
10. Property, plant and equipment 2017 2016
Building Plant Building Plant
Rs. Rs. Rs. Rs.
Cost
Opening 700 475 700 475
Additions - - - -
Revaluation (W-2) (108) - - -
Disposal (87) - - -
Transfer of Acc. Depreciation (42) - - -
Closing 463 475 700 475
Acc. Depreciation & Impairment
Opening 24 115 - 19
Dep. For the year (W-2.1) : (W-1) 22.5 36 24 19
Disposal (4.5)
Impairment (W-1) 77
Transfer to asset account (42) - -
Closing - (151) (24) (115)
Carrying amount as on 31/12/2016 463 324 676 360
Building Plant
10.1 Measurement Basis Revaluation model Cost model
Depreciation Method Straight line Reducing balance
Dep. Rate/Useful life 30 years 10%
10.2 The last revaluation was performed on 31 December 2017 by Najeeb Consultants, an independent
firm of valuers.
10.3 Movement in revaluation surplus:
2017 2016
Opening 116 120
Arose during the year - -
Transferred / adjusted 22.4+3.3+90.3 (116) (4)
WDV as on 31.12.15 - 116
10.4 Had there been no revaluation, the buildings would have appeared as follows
2017 2016
Cost (600-66) 534 600
Less: Accumulated depreciation 600−66 600
( 30 𝑥3):( 30 𝑥2) (53.4) (40)
WDV as on 31.12.15 480.6 560

10.6 Change in Estimate:

During the year 2017, depreciation method of plant was changed from straight line to reducing
balance. The new depreciation rate would be 10%. Due to above change, Depreciation for the year
has increased whereas, Profit for the year has decreased by Rs. 20 million. {𝟑𝟔(𝟑𝟔𝟎 × 𝟏𝟎%) −
𝟑𝟔𝟎
𝟏𝟔 ( 𝟐𝟑 )}
Workings
(W-1) Plant W.D.V
1/1/2015 Cost 475
31/12/2015 Dep. (475/25) (19)
31/12/2016 Dep. (475/25) (19)
31/12/2016 W.D.V 437
Impairment Loss (77)
31/12/2016 Recoverable amount 360
31/12/2017 Dep (360*10%) (36)
WDV 324
(W-2) Revaluation schedule
Rev.
Date Description Building SOCI (P/l)
surplus
1/1/15 Cost 600
31/12/2015 Dep. (600/30) (20)
31/12/2015 W.D.V 580
31/12/2015 Rev. surplus 120 120 -
31/12/2015 Revalued amount 700 120 -
31/12/2016 Dep (700/29) (24) (4) -
31/12/2016 WDV 676 116 -
30/06/2017 Dep. Of 1 building for 6 months (W-3) (1.5) (0.4) -
30/06/2017 WDV of 1 building (W-4) (82.5) (22) -
31/12/2017 Depreciation of remaining buildings (21) (3.3) -
(W-5)
31/12/2017 WDV 571 90.3 -
31/12/2017 Revaluation loss (108) (90.3) (17.7)
31/12/2017 Revalued Amount 463 - (17.7)
(W-2.1) Total Depreciation on buildings for the year 2017
Dep. Of 1 building for 6 months (W-3) 1.5
Depreciation of remaining buildings (W-5) 21
22.5
(W-3) Depreciation of 1 building for 6 months
Cost = 87/29 × 6/12 = 1.5 : Surplus = (23.2)/29 × 6/12 = 0.4
(W-4) WDV of 1 building
Rs. ‘millions’ Rs. ‘
millions’
Building Surplus
Cost
Balance 87 23.2
Acc. Depreciation (87/29 × 1.5) : (23.2/29 × 1.5) (4.5) (1.2)
82.5 22
(W-5) Depreciation of remaining buildings for the year
Rs. ‘millions’ Rs. ‘millions’
Building cost Surplus
Opening 700 120
Disposal (87) (23.2)
Balance 613 96.8
÷ Remaining Life ÷29 ÷29
21 3.3