Revaluing only the residual value.
When the carried value of an asset decreases as a result of revaluation, the decrease should be recognized as an expense (PAS) after it has been reimbursed plus from revaluation.
On December 31, 2016 TID re-evaluates the building with the new value of market of 900 thousand ALL. So in this case the remaining value decreases from 1.3 million to 900 thousand ALL, so it decreases by 400 thousand ALL. But in this case the unit has had an increasing reassessment in the years of previous. Therefore the reduction will initially cover the plus values of the previous period by fully compensating the part uncovered will pass into loss
The method of residual value follows
Excess revaluation included in capital:
Switch to Allocated Profits during the asset week.
Each year is calculated: Depreciation on accounting value of revalued – Calculated depreciation over cost historical
. The undistributed surplus can be transferred directly in retained earnings when the surplus is obtained. E all surplus can be obtained when the long-term asset sold or taken out of use. This transfer to retained earnings are not made through the statement of income but directly on the profit of retained.
In 2018, TID revalues the building to 1 million ALL.
The depreciation accumulated on the revaluation date was ALL 300,000.
Useful life remaining 10 years. In 2020, he sells the building.
Changes in the depreciation of AAGJM – During the time of use of the asset changes may occur in the predictions made in regarding its lifespan, recoverable value, etc.
A machine was bought at an initial cost of 80,000 ALL. The value of recovery is 10,000 ALL, and the estimated life expectancy it’s 7 years. It is assumed that after 2 years of work, it is noticed that this active can still be used for another 2 years and not for 5 years, as predicted.
Estimated annual depreciation = 10,000 ALL / year (Why?)
It will change to 25,000 ALL / year (Why?)
Assessment of AAGJ materials expressed in foreign currency
-at the entrance they will be converted into led at the exchange rate
. In the balance sheet they will be assessed with the historical exchange rate
It is assumed that the dry cleaning company buys one on January 5th new machinery. The purchase price of this machine from the supplier is 2,000,000 ALL. Transport costs paid from the cash register are 10,000 ALL. The purchase is made with bank transfer and a 2% discount is obtained for fast payment. Shelf life for 10 years and value of 20,000 ALL is foreseen for its recovery. On January 8 buy with subsequent payment a building, the total cost of whose purchase is 10,000,000 ALL, which will paid after 1 year. She also bought a line on January 10 technological with the total purchase cost of 1,900,000 ALL giving in return a quantity of shares of a company
K. The cost of purchasing these shares was 1,700,000 ALL while the market value is ALL 1,900,000. For maintenance of machinery the company has entered into a contract with the workshop K&O ship. She pays the office, from her bank account, on 12 January the full amount of annual repairs from 24,000 ALL. An AAGJM can be sold with cash or cash collection later. Sales operation may result:
And with profit
The result is determined by the difference between the selling price and the book value remaining unallocated during the life of asset use.
When profits or losses result, they must be determined be recognized as income or expense in the income statement in the period when the sale of the asset was realized.
AAGJM is withdrawn from use and deregistered from the property of economic entity when no future economic benefit expected from its sale or use:
A) When sold and the net value realized in the market differs from VKN then a profit / loss from the sale is realized because they deregistered with net book value
b) When they cannot be sold, AAGJM leaves the entity
An AAGJM is taken out of use when
– is no longer valid for the unit
– – has no market value
In this case the unit suffers a loss equal to the value of remaining active.
When assets become unusable, outside the will of the entity economic, due to damage or extinction by fire, earthquake, flood, theft, etc., the unit deregisters them from accounting records, with residual value. At the same time she must reflect as income the amount collected of insurance of assets. The resulting difference between them is reflected, according to the case presented, as an expense or as income of the period. Example:
On November 20, 2019 it goes out of use, due to fire damage, an initial machine worth 210,000 ALL.
Depreciation accumulated over the life of the machine is 50,000 led. Depreciation until the date of issue is calculated to be 10,000 led. So the VKN that this machine carries is 150,000 ALL. The company is rewarded by the insurance company only in the amount of 60,000 ALL. In this case the loss = 90,000 ALL.