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Lecture 13 14

The document contains lecture materials and examples regarding accounting for property, plant, and equipment under IAS 16 for a university course. It includes examples of journal entries for revaluation of buildings and plant as well as preparation of property, plant, and equipment notes based on given scenarios.

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394 views2 pages

Lecture 13 14

The document contains lecture materials and examples regarding accounting for property, plant, and equipment under IAS 16 for a university course. It includes examples of journal entries for revaluation of buildings and plant as well as preparation of property, plant, and equipment notes based on given scenarios.

Uploaded by

Ali Optimistic
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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CAF-05 Property, Plant and Equipment (IAS-16)

Lecture 13

Classwork
Solved ICAP question bank 6 (FAM).
Homework
Question bank 6 (FAM).

Lecture 14

1. Umer Limited (UL) uses the revaluation model for subsequent measurement of its property, plant and
equipment and has a policy of revaluing its assets on an annual basis using the net replacement value
method.
The following information pertains to UL’s buildings:
(i) 10 buildings were acquired in same vicinity on 1 January 2015 at a cost of Rs.500 million. The
useful life of the buildings on the date of acquisition was 10 years.
(ii) AL depreciates buildings on the straight line basis over their useful life.
(iii) The results of revaluations carried out during the last three years by Expert Valuation Service, an
independent firm of valuers, are as follows:

Fair value
Revaluation date
Rs. in million
1 January 2016 800
1 January 2017 300
1 January 2018 600
(iv) On 31 March 2018, 4 buildings were sold for Rs. 80 million each.

Required: Prepare a note on “Property, plant and equipment” (including comparative figures) for
inclusion in UL’s financial statements for the year ended 31 December 2018 in accordance with
International Financial Reporting Standards. (Ignore taxation) (13)

2. Discussion of possible MCQs from above question revaluation working.

3. Following question was solved by students in class (10 minutes allowed time). Afterwards solved
in class.
KL uses the revaluation model for subsequent measurement of its property, plant and equipment.
(i) 5 buildings were acquired in same vicinity on 1 January 2010 at a cost of Rs.200 million. The
useful life of the buildings on the date of acquisition was 20 years.
(ii) The results of revaluations carried out is as follows:
Revaluation date Fair value (Rs. in million)
1 January 2016 480
(iii) On 31 March 2016, 3 buildings were sold for Rs. 30 million each.

Required: Prepare a note on “Property, plant and equipment” for the year ended 31 December 2016
in accordance with International Financial Reporting Standards. (Ignore taxation) (6)

Umair Sheraz Utra, ACA Page |1


CAF-05 Property, Plant and Equipment (IAS-16)

4. Following information pertains to a building acquired by SK Limited (SKL) on 1 July 2012 for Rs.
360 million:
(i) The building is being depreciated on straight-line basis over 10 years.
(ii) SKL uses revaluation model for subsequent measurement of buildings. It accounts for revaluation
on net replacement value method. The details of revaluations as carried out by independent value
are as follows:
Revaluation date Fair value(Rs. in million)
31 December 2013 323
31 December 2015 208
31 December 2017 167
(iii) There is no change in useful life of the building.
(iv) SKL transfers the maximum possible amount from the revaluation surplus to retained earnings
on an annual basis.
(v) SKL’s financial year ends on 31 December.
Required: Prepare entries to record revaluation surplus/loss on each of the above revaluation date.
(Entries to record depreciation expense, incremental depreciation and elimination of accumulated
depreciation are not required). (11)
{Spring 2018, Q # 6(a)}

Homework
1. ABC Limited purchased a plant for Rs. 350,000 on 1 July 2010. The plant has an estimated useful life
of 20 years and no residual value.
ABC uses revaluation model for subsequent measurement of its property, plant and equipment and
accounts for revaluations on net replacement value method. The details of revaluations performed by
an independent firm of valuers are as follows:
Revaluation date Fair value
30 June 2011 Rs. 475,000
30 June 2012 Rs. 390,000
30 June 2013 Rs. 380,000

Required:
a) Prepare journal entries to record the above transactions from the date of acquisition of the plant
to the year ended 30 June 2013. (16)
b) Prepare asset and accumulated depreciation account to record the above transactions from the
date of acquisition of the plant to the year ended 30 June 2013. (08)
c) Assume the plant was sold for Rs. 350,000 on 01 July, 2013. Prepare journal entry to be recorded
on disposal. (02)

Umair Sheraz Utra, ACA Page |2

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