CFA Practice Question

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CFA Practice Question

Under IFRS, if a revaluation initially increases an asset's carrying value by $5,000, and in a subsequent period the asset's carrying value is decreased by $2,000, ______

A. the $5,000 is recognized as a profit and the $2,000 is recognized as a loss.
B. the $5,000 increase goes directly to equity and the $2,000 decrease is recognized as a loss.
C. both $5,000 and $2,000 go to equity directly.
Correct Answer: C

This is because the initial revaluation increases the carrying value.

User Contributed Comments 5

User Comment
cong There is an equity account called Revaluation Surplus account.
poomie83 what would be the case if the $5k was a decrease? would it still go to equity?
poomie83 Never mind. the next question answered my question. decrement goes to P&L
johntan1979 If initially decrease, it is immediately recognized as a loss. Later increases is recognized as profit up to the amount of the decrease.
farhan92 i got the concepts flipped turned upside down...
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