Q.

9 Following information pertains to property, plant and equipment of Tsuki Limited (TL):

Office building Warehouse

Acquisition:
▪ Date of acquisition 1 July 2017 1 July 2018
▪ Cost (Rs. in million) 96 156
▪ Estimated useful life (in years) 16 12

Revalued amount:
▪ 1 January 2019 (Rs. in million) 116 138
▪ 1 January 2021 (Rs. in million) 80 143

Revised useful life on 1 January 2020 (in years) 9 14

Additional information:
(i) TL uses revaluation model for subsequent measurement and accounts for
revaluation on net replacement value method.
(ii) TL transfers maximum possible amount from the revaluation surplus to retained
earnings onan annual basis.
(iii) The revalued amounts were determined by Sagheer Valuers (Private) Limited, an
independent valuation company.
Required:
In accordance with IFRSs, prepare a note on ‘Property, plant and equipment’ (including
comparative information) for inclusion in TL’s financial statements for the year ended
31 December 2021. (Column for total is not required) (18)
 A.8 Tuski Limited
Notes to the financial statement for the year ended 31 December 2021
1. Property, plant and equipment
2021 2020
Building Warehouse Building Warehouse
------------------------- Rs. in million ----------------------
Gross carrying amount:
Opening 116.00 138.00 116.00 138.00
Elimination (20) (21) -
-
Revaluation (16) 26 - -
Closing balance 80 143 116 138
Accumulated depreciation
Opening balance 20 21 8 12
Elimination (20) (21) - -

For the year 10.00 11.00 12.00 9.00

(80÷8) (143÷13) (108÷9) (126÷14)
Closing balance 10 11 20 21

Carrying amount 70 132 96 117

1.1

Building Warehouse
Measurement base Revaluation Revaluation
Useful life 9 years 14 years
Depreciation method Straight line Straight line

1.2 The last revaluation was performed on 1 January 2021 by Sagheer valuation services, anindependent
firm of valuers.
1.3 Had revaluations not been made, the carrying value of the buildings and warehouse as on31 December
2021 would have been Rs. 63 million and Rs. 117 million respectively.

Carrying value if cost model is used : Building Warehouse

----------- Rs. in million -----------
Book value on 31.12. 2020 (working) 72 126.75

Book value on 31 December 2021 (working) 63.00 117

(81×7÷9) (136.5×12÷14)

Disclosure of revaluation surplus (Office building):

2021 2020
Opening Bal. 24 27 (29 – 2)
Revaluation (16) -
Transfer of surplus (1) (3)
Closing Bal. 7 24
Disclosure of revaluation surplus (Warehouse):
2021 2020
Opening Bal. - -
Revaluation 16.25 -

Page 17 of 19
Transfer of surplus (1.25) -
Closing Bal. 15 -

Accounting entries:
Office building Dr. Cr.
1.7.2017 Office building 96
Cash 96
31.12.2017 Depreciation 3
Acc. depreciation (96/16 x 6/12) 3
31.12.2018 Depreciation 6
Acc. depreciation (96/16) 6
1.1.2019 Acc. depreciation 9
Office building (3 + 9) 9
1.1.2019 Office building 29
Rev. surplus 29
C.A (96 – 9) = 87
F.V = 116
Rev. Surplus = 29

31.12.2019 Depreciation 8
Acc. depreciation (116/14.5) 8
31.12.2019 Rev. surplus 2
Ret. Earnings (29/14.5) 2
1.1.2020 Revised useful life is 9 years.
31.12.2020 Depreciation 12
Acc. depreciation [(116 – 8)/9)] 12
31.12.2020 Rev. surplus 3
Ret. Earnings [(29 – 2)/9] 3
1.1.2021 Acc. depreciation 20
Office building (8 + 12) 20
1.1.2021 Rev. surplus 16
Office building 16
C.A (116 - 20) = 96
F.V = 80
Rev. Loss = 16
Remaining surplus before rev.loss was ( 29 – 5 = 24 ) and after rev.loss is 8 ( 24 –
16 ).
31.12.2021 Depreciation 10
Acc. depreciation (80/8) 10
31.12.2021 Rev. surplus 1
Ret. Earnings (8/8) 1

Ware house Dr. Cr.

1.7.2018 Ware house 156
Cash 156
31.12.2018 Depreciation 6.5
Acc. depreciation (156/12x 6/12) 6.5

1.1.2019 Acc. depreciation 6.5

Ware house 6.5
1.1.2019 Rev. Loss (P.L) 11.5

Page 18 of 19
 Ware house 11.5
C.A (156 – 6.5) = 149.5
F.V = 138
Rev. loss =11.5
31.12.2019 Depreciation 12
Acc. depreciation (138/11.5) 12
1.1.2020 Revised life is 14 years
31.12.2020 Depreciation 9
Acc. depreciation (138 - 12)/14 9
1.1.2021 Acc. depreciation 21
Ware house (12 +9) 21
1.12021 Ware house 26
Reversal of loss (P.L) 9.75
Rev. surplus 16.25

C.A (138 – 12 – 9) 117

F.V 143
Rev. surplus 26

Reversal of loss : 11.5 Cr Rev. surplus

(26-9.75) = 16.25
Extra dep :
2019: (13-12) = 1 Dr
2020:(156-6.5 - 13) ÷ 14
= 9.75-9 =0.75 Dr
Reversal of loss =9.75 Cr
31.12.2021 Depreciation 11
Acc. depreciation (143/13) 11
31.12.2021 Rev. surplus 1.25
Ret. Earnings (16.25/13) 1.25

Carrying amount if cost model is used (Office Building):

1.7.2017: 96
1.12.2017: 96 ÷ 16 x 6/12 = 3 ; (96 – 3 = 93)
31.12.2018: 96 ÷ 16 =6 ; (93 – 6 = 87)
31.12.2019: 96 ÷ 16 = 6 ; ( 87 – 6 = 81)
1.1.2019: Remaining life is 9
31.12.2020: 81 ÷ 9 = 9 ; (81-9) = 72
31.12.2021: 81 ÷ 9 = 9 ; (72 – 9) = 63

Carrying amount if cost model is used (Warehouse):

1.7.2018: 156
31.12.2018: 156 ÷ 12 x 6/12 = 6.5 ; (156 – 6.5 = 149.5)
31.12.2019: 156 ÷ 12 = 13; (149.5 – 13 = 136.5)
1.1.2020: Remaining life is 14
31.12.2020: 136.5 ÷ 14 = 9.75 ; (136.5 – 9.75 = 126.75)
31.12.2021: 136.5 ÷ 14 = 9.75 ; (126.75 – 9.75 = 117)

Page 19 of 19