Impairments

CFA Level I FRA
#1

Hey guys,

Trying to button up on a few topics today. One of which has to do with Impairments. According to my Secret Sauce:

“Under IFRS, the loss can be reversed if the value of the impaired asset recovers in the future. However, the loss reversal is limited to the original impairment loss. Thus, the carrying value of the asset after reversal cannot exceed the carrying value before the impairment loss was recognized.”

So I got that. Only to find on the next page under Asset Revaluations :

“Under IFRS, assets may be revalued upward to fair value. Gains reversing previous writedowns are reported on the income statement, and any excess gains are taken as an adjustment to equity in an account called revaluation surplus.”

So am I correcting in interpreting the final answer as you can actually reverse MORE than the original impairment, but the balance sheet carrying value can never exceed the orginal impairment. Therefore, in SE there will be a separate account called revaluation surplus?

#2

You can reverse more than the original impairment under IFRS but the portion of the reversal that exceeds the value of the original impairment will be booked to equity.

That is my understanding. If this is incorrect, please let me know.

#3

The Revaluation model is specific to PP&E (ias 16). This is an exception; dont lose sleep over this!