Under IFRS, all long lived assets (tangible/intangible & definite/indefinite life*) can be revalued upwards to fair value - and this value can bypass the previously recorded loss or the original cost. The adjustments would be: 1) The new carrying value of the asset up to its original cost would be recorded in PP&E 2) A gain up to the previously recorded loss would be recorded in I/S 3) Any value over the gain or the original cost would be directly recorded in Shareholder’s Equity under ‘Other Comprehensive Income’ *Note that intangible/indefinite life includes goodwill. QUESTION: What B/S entry is made on the Asset side of the equation to balance the value entered under ‘Other Comprehensive Income’? References if you are using Schweser: 1) Schweser FRA, Pg. 48, “Revaluation to Fair Value”, 3rd paragraph 3 2) Schweser FRA, pg. 24-25, ‘Inventory Write Up Example’
Dr. PPE Cr. Gain or OCI (depends on previous revaluations)
?? Let me work through an example: Begin B/S: PPE: 30 Other Asset: 70 Liability: 50 Equity: 50 1) Assume PPE is impaired by 10, then: I/S: record loss of 10 B/S: PPE: 20 Other Asset: 70 Liability: 50 Equity: 40 (-10 reflected through RE) 2) Assume PPE is revalued to 40, then: I/S: record gain of 10 B/S: PPE: 30 (revalued up to the original cost) Other Asset: 70 Liability: 50 Equity: 60 (+10 reflected through RE AND +10 as part of OCI, fair value over original cost) Asset requires +10 to be balanced - which ACCOUNT do we increase?
Trekker Wrote: ------------------------------------------------------- > ?? > > Let me work through an example: > > Begin B/S: > PPE: 30 > Other Asset: 70 > Liability: 50 > Equity: 50 > > 1) Assume PPE is impaired by 10, then: > > I/S: record loss of 10 > > B/S: > PPE: 20 > Other Asset: 70 > Liability: 50 > Equity: 40 (-10 reflected through RE) > > > 2) Assume PPE is revalued to 40, then: > > I/S: record gain of 10 > > B/S: > PPE: 30 (revalued up to the original cost) > Other Asset: 70 > Liability: 50 > Equity: 60 (+10 reflected through RE AND +10 as > part of OCI, fair value over original cost) > > > Asset requires +10 to be balanced - which ACCOUNT > do we increase? As far as I remember, only inventory is revalued up to original amount written-down … So if you have revalued inventory down to 20 then value goes up to 40 you will have inventory 30 gain +10 only … not 20 For PPE, you will revalue it in this case to 40 - not only 30 … you will have PPE 40 gain +10 in Income Statement (amount previously written off) and 10 in OCI That’s my understanding 
You are correct - that makes sense. So, to conclude, under IFRS: 1) inventory can only be revalued UP TO ORIGINAL COST or previously stated loss - gain recorded in I/S 2) PPE can be revalued UP TO FAIR VALUE - if this value is above the original cost the additional amount is recorded in OCI AND any gain up to the original cost or previous loss recorded in I/S
Trekker Wrote: ------------------------------------------------------- > You are correct - that makes sense. > > So, to conclude, under IFRS: > > 1) inventory can only be revalued UP TO ORIGINAL > COST or previously stated loss - gain recorded in > I/S > > 2) PPE can be revalued UP TO FAIR VALUE - if this > value is above the original cost the additional > amount is recorded in OCI AND any gain up to the > original cost or previous loss recorded in I/S 100%