06-24-2009, 04:51 PM
The gain or loss on revaluation of Property, plant and equipment is a non-monetary item as it does not involve any transfer of economic resources.
e.g a piece of land (treated according to IAS16 NOT IAS 40)at a NBV of <b>$5m</b> is owned by a Pakistani company in USA, when the exchange rate was <b>$1=Rs 60</b>.
The entity decides to revalue the property, after a significant decline in the US property prices, to <b>$3m</b>. The exchange rate at the time of revaluation was <b>$1= Rs 80</b>. The functional currency of the entity is Rupees.
Before the revaluation, the entity would have recorded the Land in its books at <b>Rs300m</b> ($5m x 60).
After the revaluation the the value of the land would be recorded at <b>Rs240m</b> ($3 x 80).
This loss on revaluation of <b>Rs60m</b> ( Rs300m - Rs 240m) would be recognized directly in equity.
e.g a piece of land (treated according to IAS16 NOT IAS 40)at a NBV of <b>$5m</b> is owned by a Pakistani company in USA, when the exchange rate was <b>$1=Rs 60</b>.
The entity decides to revalue the property, after a significant decline in the US property prices, to <b>$3m</b>. The exchange rate at the time of revaluation was <b>$1= Rs 80</b>. The functional currency of the entity is Rupees.
Before the revaluation, the entity would have recorded the Land in its books at <b>Rs300m</b> ($5m x 60).
After the revaluation the the value of the land would be recorded at <b>Rs240m</b> ($3 x 80).
This loss on revaluation of <b>Rs60m</b> ( Rs300m - Rs 240m) would be recognized directly in equity.
