CAF-1 · Chapter 3 · Question 2 of 15
Zeta Corp revalues its office building, resulting in an upward revaluation of Rs. 25 million. Previously, an impairment loss of Rs. 10 million had been recognized in profit or loss for this same building. How should the Rs. 25 million surplus be recorded?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Rs. 10 million is credited to profit or loss, and Rs. 15 million is credited to OCI.
Explanation
A revaluation increase is recognized in profit or loss to the extent that it reverses a revaluation decrease (or impairment) of the same asset previously recognized in profit or loss. The remaining balance goes to OCI and accumulates in equity as a revaluation surplus.
More IAS 16 Property, Plant and Equipment MCQs
- Q4Which of the following assets is excluded from the scope of IAS 16?
- Q5When an item of property, plant, and equipment is initially recognized, how should it be measured?
- Q6Which of the following costs is explicitly EXCLUDED from the cost of an item of PPE?
- Q7If an entity acquires a new asset in exchange for an old asset, and the transaction has commercial substance, how is the new asset measured?
- Q8How should an entity account for a major inspection or overhaul of an item of PPE?