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Question related to IAS 16
03-31-2009, 11:04 PM,
as per my understanding you cannot revert back to cost model. let me re-read the IAS 16 to refresh my brain.
03-31-2009, 11:07 PM,
You are welcome!!

If you find, let me know. If you don't find, please analyze the wording of paragraph 29 of IAS-16 in detail. (IFRS volumes updated 2008).

04-22-2009, 02:11 PM,
Kamran Sb,

Can "Depriciation added to the cost of Other Asset" be taken as that the depriciating asset was being used for the construction of "Other Asset" in which's cost such depriciation is to be added?

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by israrhere</i>
<br />Dear Sir Kamran please explain the procedure to be followed according to para 35 and 41 of the revaluation model.
And when will be the depreciaiton charge added to the cost of other assets instead of charging to profit and loss?
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
11-23-2009, 02:37 PM,
slam sir kamran
if u plz let me understand sec 235 s.sec 4.
and a comparison between ias16 and this s.sec.
thanks plz
11-23-2009, 03:46 PM,

Let me know where do you face the problem in undertanding Section 235 (4)? At least once try to understand it and then raise your particular questions.

I will certainly come back to you.





I just saw your message. The question you posted is in fact the answer you wish to get.


11-23-2009, 03:48 PM,

I am counting on you.

And yes, be an active participant my brother.


11-23-2009, 08:29 PM,
dear kamran

question simply is that please explain different situations under which sec 235 over ride ias 16 with practical examples.

m student of module c now back at home realy need assisstance in this regard
11-23-2009, 10:47 PM,

Differences of IAS-16 and section 235 have been materially decreased through amendments made in the CO84 in 2002 and 2003. There are three differences to be understood


The major variance is that, section 235 does not allow treating “Surplus on Revaluation” as part of Shareholders’ Equity, while IAS-16 treats it as part of such Equity. That’ why it is presented in the balance sheet as a separate line item after Equity and before Non-Current Liabilities.


Resulting from the above difference, there arises another difference, which is a bit complex.


As per IAS-16 any positive increase in carrying value of assets due to revaluation will directly be credited to “Surplus on Revaluation” and will not be taken to profit and loss account except in one case.

However, if revaluation results a reduction in carrying value of assets, the loss (negative surplus) will be first charged against any previous balance of “Surplus on Revaluation” and the remaining amount of such revaluation loss/deficit (if any) will be charged to profit and loss account as loss/expense/deficit. Now IAS uses the name of Comprehensive Income Statement instead of Profit and loss account.

If this has happened previously and a new revaluation is again carried out at a subsequent reporting date, which results into Surplus (instead of deficit/loss), THEN to the extent of deficit/loss previously accounted for in profit and loss account, the new surplus will be credited to profit and loss account (as income). The balance amount of (remaining) surplus will be credited in Equity.


Fixed assets of Rupess 100 were valued at Rs 150. Therefore there was a credit balance of Rs 50 in Revaluation Surplus account. A new valuation is done at reporting date which states that now the assets value comes to Rupees 90 only. So, the negative surplus of Rs 60 arises. (for simplicity I have ignored depreciation). IAs 16 requires that Rs 50 will be offset against Outstanding Balance of Surplus thereby decreasing it to zero (maximum adjustment). And the remaining Rs 10 will be charged to profit and loss account as loss.

Again on next year’s valuation, assets value is reported to be Rs 120 (means positive surplus of Rs 30). I am again ignoring depreciation for simplicity. Now, Rs. 10 (previously charged to profit and loss account) will be taken to profit and loss as income to mitigate the impact of revaluation loss previously accounted for. And remaining Rs. 20 will be credited to “Revaluation Surplus account”.

Section 235

Section 235 does not allow above treatment. It says that the loss on one class of assets may be adjusted against the surplus of another asset but in all cases the surplus arising out of revaluation has to be credited to “Surplus on revaluation account” (Revaluation surplus). It states that such surplus cannot be taken to profit and loss account except when actually realized. Surplus actually realizes only when an asset is sold. For example an asset of Rs 10 was revalued at Rs 12 (accumulated depreciation at the time of sale was Rs 4) and it was sold at Rs 15. Then upon sale of asset following entry will be passed


Cash 15
Acc Depreciation 4


Asset 12
Gain on sale 3
Revaluation surplus taken to profit and loss account (realized) 2


IAS 16 requires that an amount equal to incremental depreciation will be debited to Revaluation Surplus and credit will be adjusted against Depreciation Expense to reduce the net incidence on profit and loss account.

SRO 45 issued during 2003 (amended Section 235) instructed entities to transfer an amount equal to incremental depreciation from Revaluation Surplus to “Un-appropriated Profit” (retained earnings) through statement and changes in equity. (and not through profit and loss account).

Purpose was to keep the incidence on results (i.e. profit and loss account) intact and the credit be given to reserves/equity/un-appropriated profit through Statement of Changes In Equity.

To my apprehension these three are the major differences between IAS 16 and Section 235.

Let me tell you that I avoid replying academic questions on this forum and encourage students and fellows to raise professional questions since the purpose of the forum is not to academically educate people over this forum.

Therefore, at a minimum I wish students to apply their minds, make good efforts and if the issue is not resolved then come with some concrete questions.

Believe you me this forum cannot educate unless you apply your mind, do hard work, use the study materials, argue with your teachers, raise very critical questions and then come to such forum.

I hope you will understand for future.


11-23-2009, 10:49 PM,
I wrote the above answer in 10-15 minutes so there can be some typo or other mistakes.

11-24-2009, 06:09 PM,
dear kamran thank u v v much for very kindful reply
surely i ll take into account all the things next time

thnks again
03-24-2011, 07:45 PM,
Mr. Kamran,

I really appreciate your efforts and it has been of quite help.

With reference to IAS 16 para 35a and 35b i have got a few queries!

Please guide me how to tackle the issue summarized below on urgent importance

In a company where the accounting policy is to state Land and Buildings at Written down value plus surplus on revaluation to market value.
For the year ended 2009 Land and building is stated at cost of Rs. 1,000 and accumulated depreciation of Rs. 287.5, dep. for the year 2009 is Rs. 37.5 (assuming depreciation is at 5% Straight line method)and the Revalued figure of the property is Rs. 1,300.
So the presentation is as follows
Cost = Rs. 1,000
Accumulated Dep. = 287.5
WDV = 712.5
Revaluation Surplus = 587.5

Now for the year ended 2010 land and building the new valuation is Rs. 1,500.

I would like to inquire what would happen to the accumulated depreciation, the depreciation charge for the year, the opening balance and closing balance of the Land and building for the year ended 2010 under both the methods.



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