CFA Practice Question
Under U.S. GAAP, ______
A. upward revaluation of long-lived assets is not permitted.
B. asset revaluation is applied in such that losses on revaluation would be reported until the carrying value reflected depreciated historical cost.
C. asset revaluation affects reported earnings per share when revalued assets are sold.
Explanation: The U.S. GAAP requires downward revaluation but upward revaluation is not allowed. However, other non-U.S. and IFRS standards do permit such upward revaluations.
User Contributed Comments 7
| User | Comment |
|---|---|
| robkaz | What is "revaluation" exactly? Write down is not a kind of revaluation? Anybody? |
| shasha | did the Q mention L-T assets? under GAAP, we revaluate S-T assets as trading investment, as inventory per its request. |
| masha | they might be referring to the change of the historic value of the fixed asset. That is allowed in developing countries during hypoinflation and it no allower under GAAP. but i'm not sure |
| Bira | I understand wrtite down as revaluation |
| humphrey | if it's indeed 'write down', then GAAP allows it. but the other choices look fishy too. |
| jpducros | I think US Gaap allowed to reverse impairment if asset is held for sale, and disallow if asset is held for use. By "Long-Term", these asset enter into the "held for use" classification. |
| GBolt93 | it's basically impairment. B is incorrect because you can write it down below its historical depreciated cost. C. I guess it wrong because when revaluing you would report a loss/gain in the period that you revalue the asset not on sale, though I would think you would also report one at the time of sale, so not entirely sure for that one |