Even after 7 years, your video is more useful than most university lectures these days. I learned this topic in class last week but didn't understand a thing. After watching your video, I can say that I don't find this topic difficult anymore. So grateful for this!
The reversal entries are hard to understand if you are reading about them on your own but everything clicks when you explained it. Thank you. It was super helpful.
I almost cried when I was reviewing this part for my IFRS exam. Too fast to follow in the class, too messy to understand in the slides. Too stupid to ask the lecturer any questions. You are the best.
@@drdavebond : Sir, I do agree with Jade Bao. I tried a lot to understand by the literature, couldn't get it well. This Vid was really good! Thank you very much from India!!!
thankyou sir! i have my intermediate accounting exam tomorrow and kinda anxious because i didn't understand how revaluation works, really grateful i found this channel, thankyou so much!
Hi Sekgabo - I couldn't reply directly to your comment, but I do have a video on the cost model. If you search Accounting for Impairments of PPE in my channel, you'll find it there.
Oh my god, I love you so much. I've been tearing my hair out over this topic (sociology graduate going into auditing - weird, right) and you cleared it up in 8 freaking minutes!
Hi Melissa, I'm really glad it was useful, and welcome to the accounting world. If you're needing more help in auditing, check out a colleague of mine: th-cam.com/users/AmandaLovesToAudit
Amazing lecture Dr Dave🙏🙏I love accounting but don't know how I couldn't keep up but after your video...Found it to be more interesting.... love your videos Doc🙋♂Really appreciate it.
thank you so much for your videos. I should've found your youtube channel, then I wouldn't have failed my accounting standards & regulations subject last semester. You explained so so well, very clear and concise. I really appreciate your work, you don't know how much it means to me since my lecture videos are so so shit haha. THANK YOU SO MUCH.
Thank you so much for your kind advises on revaluation adjustments when there is a previous revaluation gains or losses. This will really helpful for me to sit this month exam.
Thank you so much for your lecture. Yesterday I had my professional exam and I was badly stuck in this topic, you explained it soo well. Thank you very much. Stay Blessed :)
Hi I am confused about the revaluation surplus (about 6:50). The value of the asset without any revaluation at that point would be 600'000 (initial cost of 1'000'000 less 4y of depreciation of 100'000 per year). My understanding so far was, that until that initial amount, the upward revaluation goes through PnL. In this case that would be 225'000 revaluation gain and above that 300'000 revaluation surplus (through OCI). Could you please explain me, why it is the other way around? Thank you so much in advance.
Hi, I'm currently reading PPE under the non-current assets/balance sheet reading in the CFA lvl1 curriculum, in the book they briefly mention this method with this sentence "Under the revaluation model, the reported and carrying value for PPE is the fair value at the date of revaluation less any subsequent accumulated depreciation". I'm confused with the "subsequent" part, from your example i feel like it should be "previous". Also, at 5:30 you mention that the accumulated depreciation shouldn't affect the balance sheet so my question would be, is the new fair value the value recorded in the PPE item of the balance sheet?
Hi Veri, Those are good questions. In answer to your first, it is subsequent. The reason for this is, is that at the time of revaluation we first write back all the accumulated depreciation before revaluing the asset. In this case the first revaluation saw $200,000 of accumulated depreciation being debited and the asset being credited. The revaluation is then applied to the asset, and the asset account is at the revalued amount. Leaving the accumulated depreciation in there would make things really confusing. The carrying value is then the fair value at date of revaluation (i.e. $500,000) at time 2, less any subsequent acc dep - nothing at time 2, but after a year, there's been one year of depreciation (500,000 - 62,500), after 2 years, there has been two (500,000 - 62,500 - 62,500), and so on. In relation to your second question - yes. Getting rid of accum dep changes it from Asset 1,000,000 less Acc Dep 200,000 = net asset $800,000 to Asset $800,000. The net asset value of the PPE is $800,000, just now all in one account. Hope the above helps. Cheers Dave
@@drdavebond Thanks a lot! I realized many hours later that I was treating "reported and carrying value" as the same thing when they are actually two different points in time (In my defense I blame language barrier). Your response and video also helped me understand the process better.
Read a fat textbook for two days, could not understand much. Watched this video three times, i understand everything!! Thank you sir.. Do you have a video on the cost model?? if not, please make one :) or send me a link to a video you recommend. All the other videos are terrible or don't have practical examples
Thank you for making this video. I am studying for my CA in New Zealand and this is really helpful. I think it would be even more helpful if the affects of tax were also shown, specifically the journals for deferred tax asset and deferred tax liability.
Very informative and brief! I do have one question though it’s connected to revaluation reserve. I read that when an asset is sold the revaluation reserve gets transferred to retained earning, that it cannot be recycled. My question is why it cannot be transferred through profit and loss account?
Hi Buttercup, thank you. You're right. Para 41 allows ("may") but doesn't require any revaluation surplus recognised in equity to be transferred to retained earnings on disposal. So one answer to your question is because that is the rule. The more interesting part of your question though is why is this the rule - which is what I think you may be asking. I would hazard it would likely be for the same reason that they don't allow upwards revaluations to go into profit in the first place for revaluations. Although would need to check the Basis for Conclusions from the IASB to confirm this. Cheers Dave
So essentially the revaluation of an asset occurs in OCI, and as the value of the asset fluctuates due the market, you make those adjustments in a accumulated depreciation on the balance sheet, showing up in the OCI
Hi +Spunky Dude. There are a number of differences, but the main one is the scope that 40 and 16 relate to. 40 relates to investment property, whilst 16 relates to PPE. The actual fair value in both would be the same, but the accounting would be slightly different (in 40 the entity gets shows all gains and losses, whilst in 16 generally only losses get shown in P/L). Hope that helps
Thank you Sir, I had some doubts about why P/L account was debited when there was a Reval loss and why OCI was credited when you have a Reval Gain. You cleared my doubts very well.
For downward revaluations, I'm presuming that where you credit asset a/c, it's strictly credit 'Accumulated impairment account' instead. Accumulated impairment is deducted from PPE cost in the Balance Sheet. The benefit of this is that for a subsequent upwards revaluation, you can easily check if there's some part to be recognised through 'Other income' or through OCI instead, because the existence of the 'Accumulated inpairment' account tells you that there was a previous downwards revaluation impact- this wouldn't be as easily seen if you had just credited the asset a/c on the initial downwards revaluation.
Hi Brian, that's a good question. It does actually run through the asset account itself. You're in effect changing the headline figure. Looking at AASB 116.31 "After recognition as an asset, an item of PPE whose FV can be measured reliably shall be carried at a revalued amount, being its FV at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses." But you're right, that does mean that you'll need to keep track of the original cost of the asset, as well as subsequent revals to know which account is required in case of a reversal.
@@drdavebond Thanks so much for getting back promptly, Dave. I'm probably splitting hairs here but I'm wondering if either approach is acceptable- the AASB requirement to carry the asset at a revalued amount just refers to the number appearing in the Balance Sheet- we need to show the asset at the new market value, the issue is that it's more or less a matter of what ledgers are used to obtain that number. The AASB requirement doesn't seem to obligate the crediting to the Asset Cost account of a downward adjustment. It seems viable to use the 'Accumulated impairment' approach, since the Balance Sheet would still show the correct carrying amount if the downward adjustment was credited to Accumulated impairment. As noted, this latter approach has the aforementioned benefit of alerting the accountant to the existence of a prior downward adjustment which may be helpful for a later upwards revaluation. My source for this approach was a review of the UK company Tesco plc accounts some time back (the notes included the use of accumulated impairment in the fixed assets data) but I may be out of date or there may be some inconsistency between UK and USA treatments, so just seeking further views. Thanks again for your genuinely helpful materials!
Hi Maison, good question. AASB 116 is silent on this treatment - para 29 says they have to pick one or another, and I can't see anywhere in the standard that suggest that they can change. In saying that, AASB 116 doesn't included IAS 16.32-33 so potentially they speak to this. I have seen a reference in the Craig Deegan text "Australian Financial Accounting" which states "However, AASB 116 allows an entity to switch from the fair-value basis of valuation back to the cost basis as long as the change generates financial information that is more relevant and as long as adequate disclosures of the change in accounting policy are made." (p. 204). But he doesn't reference where this comes from in 116. So to your question, it doesn't look they could go from cost to revaluation, but the reverse may be possible. Regardless, if they were (in either direction), it would constitute an accounting policy change. Hope that helps - and apologies for the delay. Cheers Dave
I don't understand the first example where we have first Revaluation loss the second entry supposed to be Dr Land 20000 Cr R/G Cr R/S 10000? aren't we?
Thank you sir, one more question from my side: suppose in JAN 20X1 we have a PPE=1000$ useful life is 10 years, @ the start of year 20X2 we revalued to $1710 (remaining useful life 9 yrs), at the end of year 20X3 we revalued it to $1204 (remaining life 7 years) what will be the balance in revaluation reserve at 20X3 if the company has the policy to transfers excess dep from revaluation reserve to general reserve ? ACCOUNTING PERIOD JAN - DEC
Hi SylosisDark, the general impact would be that when an asset is revalued, that only occurs for accounting purposes. The tax base of the asset doesn't change. You'll show a DTA/DTL to reflect the tax component: I.e. upwards revaluation of $50,000 with a 30% tax rate: Dr Asset 50,000 Cr DTL 15,000 (30% x $50,000) Cr Reval Surplus 35,000 (70% x $50,000) Hope that helps Cheers Dave
Sir You said that upward revaluation to equity and downward revaluation to P/L My question is that when General entry for upward revaluation is Asset acc debit to Revaluation Acc Credit than where will be the impact of revaluation acc Credit if it is not other INCOME?
Also if land A had a downward revaluation in last year, and Land B had upward revaluation in this financial year, are they treated separately? or should I offset land A's downward revaluation in P&L with Land B's gain first then put the rest to OCI? Thanks
i am still not clear about the class you mention in the video. for eg, if the land is mix with building under freehold property, and the land is revalue, does it affect the building? sorry for my bad english ;(
Hi KyungSoo's Girl - there are a variety of different classes, and land and buildings combined can be considered a class. Check out IAS 16 paragraph 37 for more info.
Whilst there are some similarities, investment properties are covered under AASB 140/IAS 40 Investment Property. A key difference is that any gains or losses under the fair value method go through profit or loss (IAS 40.35) www.aasb.gov.au/Pronouncements/Current-standards.aspx
Hi Thu, glad I could help. In terms of a disposal, you just need to get rid of whatever balances are in the asset account, and any associated accumulated depreciation or accumulated impairment accounts. So if the PPE has $100,000 in the account and accumulated depreciation of $70,000 you would Dr Acc Dep $70,000 and Cr PPE $100,000. You'd also need to Debit the consideration (i.e. say they received $40,000 cash) - Dr Cash $40,000, and then Dr/Cr the difference to gain or loss (here it would be Credit Gain $10,000).
Hi Xinrong, The reason is that by using the revaluation model, the entity is going to use the fair value of the asset. There is no depreciation involved in this. Say we had a $1,000 asset with $100 of acc dep being revalued to $1,400. If we left the acc dep there, we'd have to take the asset value up to $1,500 to give the new value of $1,400 (i.e. $1,500 - $100). Which doesn't make sense at all. By deducting depreciation of $100, you get the carrying value of $900, and then adjust it up to $1,400. Does that help? Cheers Dave
Even after 7 years, your video is more useful than most university lectures these days. I learned this topic in class last week but didn't understand a thing. After watching your video, I can say that I don't find this topic difficult anymore. So grateful for this!
Hi M, so glad that you found it useful, and that you don't find it difficult anymore :)
Cheers
Dave
same here thank you..
and I share the same sentiments 9 years later 😄
The reversal entries are hard to understand if you are reading about them on your own but everything clicks when you explained it. Thank you. It was super helpful.
Thanks Areeba :)
U have condensed my uni’s 1.5hr lecture into 7mins!! What a time saver. Thank you
Glad it helped :)
I almost cried when I was reviewing this part for my IFRS exam.
Too fast to follow in the class, too messy to understand in the slides.
Too stupid to ask the lecturer any questions.
You are the best.
Thanks Jade, really appreciate it
@@drdavebond : Sir, I do agree with Jade Bao.
I tried a lot to understand by the literature, couldn't get it well. This Vid was really good!
Thank you very much from India!!!
Yes, me too! I felt so crazy and dumb coz everyone else understood it and my lecturer spent 2 days on it.
thankyou sir! i have my intermediate accounting exam tomorrow and kinda anxious because i didn't understand how revaluation works, really grateful i found this channel, thankyou so much!
You're more than welcome - and I hope your exam went well!
I sat in three classes on this topic, but just didn't get it. But thanks to this video, its crystal clear now. Well explained. Thank you!!
Thanks kedar davis. I'm glad I could help out. Good luck with your course
Omw, i cannot believe i learnt this in 7mins. Thank you so much, it's very much appreciated. ❤
Great video. I'm revising the basics before my final board exam, and it provides all the info I need for an effective review.
Wow thank you. I don’t know why my uni lecturers have to drag the lectures out with useless stuff and then skim over the practical examples.
You're more than welcome Jackson, just doing what I can to help
Hi Sekgabo - I couldn't reply directly to your comment, but I do have a video on the cost model. If you search Accounting for Impairments of PPE in my channel, you'll find it there.
Thank you for the video. this video is more easier to understand than the textbook.
Glad it was useful Danny
Thank you so much. This was very helpful!
You have a new subscriber all the way from SA🇿🇦😊
You are more than welcome, and thank you so much for the subscription too :)
Oh my god, I love you so much. I've been tearing my hair out over this topic (sociology graduate going into auditing - weird, right) and you cleared it up in 8 freaking minutes!
Hi Melissa, I'm really glad it was useful, and welcome to the accounting world. If you're needing more help in auditing, check out a colleague of mine: th-cam.com/users/AmandaLovesToAudit
Really powerful video. I tried to hard to understand this. Your illustration is just simple and brilliantly presented.
Glad you liked it!
Thank you, again. My midterm test saved by you. Good work!
Glad I could help Audrey
THANK YOU! Finally someone explained it clearly!
Glad it helped!
Thanks, clear and helpful. I self-study for ACCA (with IFRS 16 PPE), and this video clear all the questions.
You're more than welcome, and glad it was useful for you
Amazing lecture Dr Dave🙏🙏I love accounting but don't know how I couldn't keep up but after your video...Found it to be more interesting.... love your videos Doc🙋♂Really appreciate it.
thank you so much for your videos. I should've found your youtube channel, then I wouldn't have failed my accounting standards & regulations subject last semester. You explained so so well, very clear and concise. I really appreciate your work, you don't know how much it means to me since my lecture videos are so so shit haha. THANK YOU SO MUCH.
You're more than welcome. I used to teach ASR, but it has been a little while now. Hope this semester is going better for you.
the way u simplify this method is wow
thank you.
You're welcome Ntwanano
best 7 minutes I have spent on youtube
Really easy to understand and I like your voice and pace! Thanks for making the video.
very clear and to the point , thank you for your time to prepare the video !
I'm understand very long time. This is excellent lecture.
I'm glad it was helpful for you Harish
Thank you so much for your kind advises on revaluation adjustments when there is a previous revaluation gains or losses. This will really helpful for me to sit this month exam.
Glad it was helpful Isham!
My greeting from Egypt u r very simple explanation u r perfect
Thank you for your kind words
Thank you for this very clear, concise and practicable explanation.
Thanks Dr Dave! I was so confused before that and now you clear up my confusion! Thanks a lot! Please keep teaching ^^
Thanks Cherie
Please keep helping us you are easy to understand unlike my class instructor
Happy to help Sandy
Man this helps so much IFRS differences have been kicking my butt.
Glad I could help Jayh
This is a great video. It gives me a clearer understanding of the topic. Thank you.
You're more than welcome Agnes. Glad it was useful for you
Perfect 👌 didn’t understand this content in lectures but it’s all clear now
Victoria Sheehama thank you 🙏 glad it was useful
Thank you so much for your lecture. Yesterday I had my professional exam and I was badly stuck in this topic, you explained it soo well.
Thank you very much.
Stay Blessed :)
You're welcome Sidra. I hope your exam went well.
Exams
Are you a CA student
Thank you for the helpful video. Much more efficient than the lecture.
You're more than welcome, and that's what I'm aiming for
Perfect !
In an easy way you delivered a difficult topic .
Thank you .
Thanks Ana!
Thanks Ana
Simple and straightforward please keep these videos
Thanks Asanda, I'm glad you found them useful
Better than the book i was using. Bless your soul. I will let you know how my midterm exams goes. My brother :)
Thanks Roberto - I hope they went well.
Excellent. Got a first!!! Thanksss a lot. Hope you have other videos on Operation and Finance Leasing :)
awesome video! Any chance you could do one for revaluation on intangible assets? Any differences besides substituting depreciation for amortisation?
very good video, clean well explained examples and the best part: everything in just 8min. Thanks!
Thanks Jesus
It really helped me through this difficult topic, Thankyou so much. The video was easy to understand.
I finally understood this topic, huge thanks!!!
Glad it was helpful for you Narmin
This is most helpul for vedio sir..i am respect you
Hi
I am confused about the revaluation surplus (about 6:50). The value of the asset without any revaluation at that point would be 600'000 (initial cost of 1'000'000 less 4y of depreciation of 100'000 per year). My understanding so far was, that until that initial amount, the upward revaluation goes through PnL. In this case that would be 225'000 revaluation gain and above that 300'000 revaluation surplus (through OCI).
Could you please explain me, why it is the other way around?
Thank you so much in advance.
Hi, I'm currently reading PPE under the non-current assets/balance sheet reading in the CFA lvl1 curriculum, in the book they briefly mention this method with this sentence "Under the revaluation model, the reported and carrying value for PPE is the fair value at the date of revaluation less any subsequent accumulated depreciation". I'm confused with the "subsequent" part, from your example i feel like it should be "previous". Also, at 5:30 you mention that the accumulated depreciation shouldn't affect the balance sheet so my question would be, is the new fair value the value recorded in the PPE item of the balance sheet?
Hi Veri,
Those are good questions. In answer to your first, it is subsequent. The reason for this is, is that at the time of revaluation we first write back all the accumulated depreciation before revaluing the asset. In this case the first revaluation saw $200,000 of accumulated depreciation being debited and the asset being credited. The revaluation is then applied to the asset, and the asset account is at the revalued amount. Leaving the accumulated depreciation in there would make things really confusing.
The carrying value is then the fair value at date of revaluation (i.e. $500,000) at time 2, less any subsequent acc dep - nothing at time 2, but after a year, there's been one year of depreciation (500,000 - 62,500), after 2 years, there has been two (500,000 - 62,500 - 62,500), and so on.
In relation to your second question - yes. Getting rid of accum dep changes it from Asset 1,000,000 less Acc Dep 200,000 = net asset $800,000 to Asset $800,000. The net asset value of the PPE is $800,000, just now all in one account.
Hope the above helps.
Cheers
Dave
@@drdavebond Thanks a lot! I realized many hours later that I was treating "reported and carrying value" as the same thing when they are actually two different points in time (In my defense I blame language barrier). Your response and video also helped me understand the process better.
@@RidDik417 No problems at all, and you're more than welcome.
@@RidDik417 You're more than welcome
Revaluation made easy, especially the reversal of previous revaluation. Thank you sir.
Thanks Gilbert - you're more than welcome
no doubts at all. wish you the best.
Thanks Ghaleb - you too!
Dr your work really helps me a lot. So i don't see inventory, i hope you upload it if you haven't uploaded it Dr. Most of all please explain NRV.
samuel cindi Hi - unfortunately my other duties have meant production has slowed down - but hopefully soon.
Read a fat textbook for two days, could not understand much. Watched this video three times, i understand everything!! Thank you sir.. Do you have a video on the cost model?? if not, please make one :) or send me a link to a video you recommend. All the other videos are terrible or don't have practical examples
After paying an exorbitant amount of tuition fees for an MPA course, an 8-minute clip that is free of charge has cleared my confusion.
You're welcome Ian. Out of interest which Uni are you at?
UniAdelaide :)
thank you so much! helped alot on the cpa exam
Glad it helped Rajvir!
@@drdavebond do you have any videos on IFRS 15 (Revenue)
@@rajvirbola6165 unfortunately I don't at this point in time
I totally didnt get this subject until now, I might stand a chance of passing this exam now. Thanks
Thanks Andre - I hope you're exam went well.
Thank you for making this video. I am studying for my CA in New Zealand and this is really helpful.
I think it would be even more helpful if the affects of tax were also shown, specifically the journals for deferred tax asset and deferred tax liability.
Woah.... Supper effective and efficeint....thanks
Welcome 😊
Hey @drdavebond at @5:55 why is the accumulated depr = 125000, if there is a total of 4 years passed? Great video by the way :)
It's because the original two years' of depreciation gets wiped on the revaluation. Then it's 2 years at $62,500.
@@drdavebond Hi, but the remaining useful life is 10-4=6 years. Will the denominator become 6 years instead of 8 years? Thanks :)
@drdavebond would u kindly explain how you got the 62500
Thanks for the video mate, really well explained!
I hope you discuss the two approaches not only the elimination.
Very informative and brief!
I do have one question though it’s connected to revaluation reserve. I read that when an asset is sold the revaluation reserve gets transferred to retained earning, that it cannot be recycled. My question is why it cannot be transferred through profit and loss account?
Hi Buttercup, thank you.
You're right. Para 41 allows ("may") but doesn't require any revaluation surplus recognised in equity to be transferred to retained earnings on disposal. So one answer to your question is because that is the rule.
The more interesting part of your question though is why is this the rule - which is what I think you may be asking. I would hazard it would likely be for the same reason that they don't allow upwards revaluations to go into profit in the first place for revaluations. Although would need to check the Basis for Conclusions from the IASB to confirm this.
Cheers
Dave
great teaching great video thanks a lot Doc.
Thanks J
So essentially the revaluation of an asset occurs in OCI, and as the value of the asset fluctuates due the market, you make those adjustments in a accumulated depreciation on the balance sheet, showing up in the OCI
so useful for board exams (from Philippines)
I'm really glad it was helpful for you
Awesome video. Extremely helpful. Thanks!
+Kenton H Thanks - glad it was useful
short and simple thank you very much
Thanks Aluwani
Thanks for the video..
it really did help
I wanted to know the difference between the fair value adopted in IAS 40 and IAS 16
Thank you..
Hi +Spunky Dude. There are a number of differences, but the main one is the scope that 40 and 16 relate to. 40 relates to investment property, whilst 16 relates to PPE. The actual fair value in both would be the same, but the accounting would be slightly different (in 40 the entity gets shows all gains and losses, whilst in 16 generally only losses get shown in P/L). Hope that helps
Thank you Sir, I had some doubts about why P/L account was debited when there was a Reval loss and why OCI was credited when you have a Reval Gain. You cleared my doubts very well.
quirky Not a problem. I'm glad I could help out.
wonderful. easy to understand. thank you for this
You're very welcome!
For downward revaluations, I'm presuming that where you credit asset a/c, it's strictly credit 'Accumulated impairment account' instead. Accumulated impairment is deducted from PPE cost in the Balance Sheet. The benefit of this is that for a subsequent upwards revaluation, you can easily check if there's some part to be recognised through 'Other income' or through OCI instead, because the existence of the 'Accumulated inpairment' account tells you that there was a previous downwards revaluation impact- this wouldn't be as easily seen if you had just credited the asset a/c on the initial downwards revaluation.
Hi Brian, that's a good question. It does actually run through the asset account itself. You're in effect changing the headline figure. Looking at AASB 116.31 "After recognition as an asset, an item of PPE whose FV can be measured reliably shall be carried at a revalued amount, being its FV at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses." But you're right, that does mean that you'll need to keep track of the original cost of the asset, as well as subsequent revals to know which account is required in case of a reversal.
@@drdavebond Thanks so much for getting back promptly, Dave. I'm probably splitting hairs here but I'm wondering if either approach is acceptable- the AASB requirement to carry the asset at a revalued amount just refers to the number appearing in the Balance Sheet- we need to show the asset at the new market value, the issue is that it's more or less a matter of what ledgers are used to obtain that number. The AASB requirement doesn't seem to obligate the crediting to the Asset Cost account of a downward adjustment. It seems viable to use the 'Accumulated impairment' approach, since the Balance Sheet would still show the correct carrying amount if the downward adjustment was credited to Accumulated impairment. As noted, this latter approach has the aforementioned benefit of alerting the accountant to the existence of a prior downward adjustment which may be helpful for a later upwards revaluation. My source for this approach was a review of the UK company Tesco plc accounts some time back (the notes included the use of accumulated impairment in the fixed assets data) but I may be out of date or there may be some inconsistency between UK and USA treatments, so just seeking further views. Thanks again for your genuinely helpful materials!
thank you! you just help me understand my 3 hour classroom lecture in 7 minutes.
thanks for the best explanation now i do understand.
Thanks Lydia
its really help my report in Theory of Accounts. Thanks Pal
Stephanie Cabbab You're welcome. Glad I could help
Hi Dr.DaveBond, I am still confused @ the reversing from dr. loss to cr. reval gain.
Thủy Hainsworth it is really confusing
Great video! How does Defferd tax asset and liability will be affected from revalueation?
Hi Davie...quick one , if the entity uses cost model and then at year end revalues assets does it constute a change in accounting policy?
Hi Maison, good question.
AASB 116 is silent on this treatment - para 29 says they have to pick one or another, and I can't see anywhere in the standard that suggest that they can change. In saying that, AASB 116 doesn't included IAS 16.32-33 so potentially they speak to this.
I have seen a reference in the Craig Deegan text "Australian Financial Accounting" which states "However, AASB 116 allows an entity to switch from the fair-value basis of valuation back to the cost basis as long as the change generates financial information that is more relevant and as long as adequate disclosures of the change in accounting policy are made." (p. 204). But he doesn't reference where this comes from in 116.
So to your question, it doesn't look they could go from cost to revaluation, but the reverse may be possible. Regardless, if they were (in either direction), it would constitute an accounting policy change.
Hope that helps - and apologies for the delay.
Cheers
Dave
Thank you! Really powerful video.
Thank you
Beautifullly layed, thank yu my friend. ~SA
I don't understand the first example where we have first Revaluation loss the second entry supposed to be Dr Land 20000 Cr R/G Cr R/S 10000? aren't we?
thanks for the video and really its helpful....
Thanks Arun, I'm glad it was.
Thank you sir, one more question from my side: suppose in JAN 20X1 we have a PPE=1000$ useful life is 10 years, @ the start of year 20X2 we revalued to $1710 (remaining useful life 9 yrs), at the end of year 20X3 we revalued it to $1204 (remaining life 7 years) what will be the balance in revaluation reserve at 20X3 if the company has the policy to transfers excess dep from revaluation reserve to general reserve ? ACCOUNTING PERIOD JAN - DEC
good one ..very helpful
Thanks Dumisani
How would all this work with tax expense and deferred tax liability? Can you explain how the journal entries would work
Hi SylosisDark, the general impact would be that when an asset is revalued, that only occurs for accounting purposes. The tax base of the asset doesn't change.
You'll show a DTA/DTL to reflect the tax component:
I.e. upwards revaluation of $50,000 with a 30% tax rate:
Dr Asset 50,000
Cr DTL 15,000 (30% x $50,000)
Cr Reval Surplus 35,000 (70% x $50,000)
Hope that helps
Cheers
Dave
Sir You said that upward revaluation to equity and downward revaluation to P/L
My question is that when General entry for upward revaluation is Asset acc debit to Revaluation Acc Credit than where will be the impact of revaluation acc Credit if it is not other INCOME?
very straightforward!
Thank you! This video helps a lot!
+Xiaodan Kong You're welcome - I'm glad it was helpful
Great video! Thank you so much
You're very welcome!
Also if land A had a downward revaluation in last year, and Land B had upward revaluation in this financial year, are they treated separately? or should I offset land A's downward revaluation in P&L with Land B's gain first then put the rest to OCI?
Thanks
doing the lord's work
Thank you
I have many usefull this viedio I'm sri Lanka university student ❤
i am still not clear about the class you mention in the video. for eg, if the land is mix with building under freehold property, and the land is revalue, does it affect the building?
sorry for my bad english ;(
Hi KyungSoo's Girl - there are a variety of different classes, and land and buildings combined can be considered a class. Check out IAS 16 paragraph 37 for more info.
amazing..great video
T
Thanks. you made my life simpler
You're welcome Limda - glad I could help
Dr Dave, your vedio is very good but I kindly request to slow the way you talk
+Mostafa Abd Ellatif Thanks for your feedback. There's not much I can do about this video, but I'll take that on board for future videos
It really helps mate!!! thanks
Jack Liu No worries Jack. Glad it was helpful
Thanks, it was very helpful mate👍
Dr. Dave you are so cool 💓💓💓💓
Does this apply to Investment properties?
Whilst there are some similarities, investment properties are covered under AASB 140/IAS 40 Investment Property. A key difference is that any gains or losses under the fair value method go through profit or loss (IAS 40.35) www.aasb.gov.au/Pronouncements/Current-standards.aspx
Thank you very much Sir. I understand it better now.
@@arigonz Glad I could help
U r fantastic..appreciated!
+Kirshan Kumar Thanks Kirshan!
Thanks, i could not understand ias 16 untill I saw your video. But if fix assets can be disposed what do we do?
Hi Thu, glad I could help.
In terms of a disposal, you just need to get rid of whatever balances are in the asset account, and any associated accumulated depreciation or accumulated impairment accounts. So if the PPE has $100,000 in the account and accumulated depreciation of $70,000 you would Dr Acc Dep $70,000 and Cr PPE $100,000. You'd also need to Debit the consideration (i.e. say they received $40,000 cash) - Dr Cash $40,000, and then Dr/Cr the difference to gain or loss (here it would be Credit Gain $10,000).
you are amazing, thank you!
Happy to help!
Thanks easy and understandable
You're more than welcome Mercy
Thank you for simplification!
You're more than welcome Siddhartha
Why remove depreciation before the revaluation, does this mean it should carry out with the history cost instead of the carrying value?
Hi Xinrong,
The reason is that by using the revaluation model, the entity is going to use the fair value of the asset. There is no depreciation involved in this. Say we had a $1,000 asset with $100 of acc dep being revalued to $1,400. If we left the acc dep there, we'd have to take the asset value up to $1,500 to give the new value of $1,400 (i.e. $1,500 - $100). Which doesn't make sense at all.
By deducting depreciation of $100, you get the carrying value of $900, and then adjust it up to $1,400. Does that help?
Cheers
Dave