SUBSEQUENT MEASUREMENT OF PROPERTY, PLANT AND EQUIPMENT (PPE)

1. 5. ACCOUNTING TREATMENT ON REVALUATION

1.1. SURPLUS

1.1.1. If an asset’s carrying amount is increased, the increase shall be recognized in other comprehensive income (OCI) and credited to equity under the heading of revaluation reserve.

1.1.2. However, the increase shall be recognized in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognized in profit or loss.

1.1.3. The balance on the revaluation reserve is transferred to retained earnings when:

1.1.3.1. The asset is retired or disposed off or

1.1.3.2. The asset is used and depreciated

1.1.4. Dr Revaluation reserve xx Cr Retained earnings xx

1.2. DEFICIT

1.2.1. If an asset’s carrying amount is decreased, the increase shall be recognized in profit or loss.

1.2.2. However, the decrease shall be recognized in other comprehensive income (OCI) and debited to equity under the heading of REVALUATION RESERVE to the extent of any credit balance existing in the revaluation reserve in respect of that asset.

1.2.3. First Revaluation

1.2.3.1. Increase in asset ( when the fair value exceeds the carrying amount) Dr Asset (PPE) xx Cr Revaluation reserve/OCI xx

1.2.3.2. Decrease in asset ( when carrying amount exceeds the fair value) Dr SOPL-deficit xx Cr Asset (PPE) xx

1.2.3.3. Eliminate accumulated depreciation at valuation date Dr. Accumulated depreciation xx Cr. Asset (PPE) xx

2. 4. REVALUATION MODEL PROCEDURES

2.1. Method to record revaluation

2.1.1. Alternative 1

2.1.1.1. Gross carrying amount is restated proportionately with changes

2.1.1.2. Asset now equals the revalued amount

2.1.2. Alternative 2

2.1.2.1. Accumulated depreciation is eliminated against the gross carrying amount

2.1.2.2. Net amount is adjusted to its fair value

3. 1. Option for subsequent measurement

3.1. Cost Model (MFRS116.29)

3.2. Revaluation Model

4. 2. COST MODEL

4.1. Asset is carried at its costs less any accumulated depreciation and any accumulated impairment losses

4.2. Any increase in the fair value of the PPE item will not be made or recognized

4.3. Depreciation is based on cost less residual value.

5. 3. REVALUATION MODEL

5.1. The asset is carried at revalued amount, being its fair value at the date of revaluation less subsequent depreciation and impairment

5.2. This model can be selected if the fair value can be measured reliably.

5.3. When a PPE item is revalued, the entire class of PPE shall be revalued.

5.4. Revaluations should be carried regularly.