Depreciation & Downward Revaluation

[lws_sanlee]

Hi, this is my 1st time post this mail. I have some questions I dont sure:

- What are the difference about depreciation & downward revaluation?
- How is the transactions for the downward revalued asset has been sold?
- How is the journal entries for the asset becomes a realised loss?

TQ so much

[Grace]

Hi,

I am not sure exactly what you are asking. However, here is my response to what I have understood from your thread.

i. Depreciation and downward revaluation
Depreciation
As defined in IAS 16 Property, plant and equipment Para 6, depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. It is charged every year, irrespective of change in the fair value of the asset.

Downward revaluation
If the book value of an asset is more than its fair value, this is called downward revaluation. Loss on revaluation, i.e. excess of the book value over fair value, should be charged to the income statement.

ii. On sale of downward revalued asset
The effect of downward revaluation will be given at the time of revaluation. On the sale of such an asset, the accounting entries will be the same as for any other asset. (I think you are confusing the situation with upward revaluation where revaluation surplus is created.)

iii. Realised loss
I don’t understand this. However, if you are asking what will happen if there is a loss on the sale of the downward revalued asset, this loss will be charged to the income statement.