Hello,
I’m reviewing LOS 30.h and am not certain about lost recovery under IFRS. Let’s assume an asset was brought 3 years ago. During the first year, write down due to impairments was $10,000. The write down was $15,000 in the second year. In year 3, the fair value minus selling costs is $20,000 more than the carrying value. That means the write up in the third year would be $20,000, or would it be $15,000?
Thanks for your helps
As i understand it under IFRS the write up is permitted up to the amount of HISTORICAL / Original COST(not only the previous loss), in your case the write up could be done up to 25 000 (10 000 +15 000 $) , gains in excess of previous impairments would go through OCI and reported in equity as “Revaluation surplus”
Under the revaluation model (only permitted under IFRS) long-lived assets can be revalued to their fair values. Revaluation amounts above historical write-downs are recognized directly in equity via the revaluation surplus account in other comprehensive income (OCI). Revaluation amounts up to historical write-downs are recognized directly in net income as gains.
In your example the historical write-downs amounted to $25,000. According to the revaluation model the asset could be revalued to fair value by $20,000 which would show up under net income. Any revaluation amount above $25,000 would be booked directly into equity.
Note that under US GAAP there would not be a revaluation whatsoever.
Regards,
Oscar
Thank you both. A different question. How about inventories? I believe for IFRS, inventories can only be written up to historical cost and revaluation method would not apply?
Thanks
Under IFRS, inventories could be written up, but only to the extent that it reverses previous write downs. No revaluation allowed above historial cost.
And note that under US GAAP, no write-up is allowed.