Revaluation Surplus – NBC Institute

FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)

Preparation of extracts of the statement of profit or loss and statement of financial position for Chidinma Ventures Plc, accounting for leasehold property revaluation.

Question

Chidinma Ventures Plc. acquired a 12-year lease on a property on 1 October, 2016 at a cost of N132 million. The company’s policy is to revalue its properties to their market value at the end of each year.

Accumulated amortization is eliminated, and the property is restated to the revalued amount. Annual amortization is calculated on the carrying values at the beginning of the year. The market values of the property on 30 September 2017 and 2018 were N127.05 million and N96.25 million, respectively. The existing balance on the revaluation surplus at 1 October, 2016 was N27.5 million. This is related to some non-depreciable land whose value had not changed significantly since 1 October 2016.

Required:
Prepare extracts of the statement of profit or loss and statement of financial position for the year ended 30 September 2017 and 2018 in respect of the leasehold property.

Answer

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Tags: Amortization, IAS 16, Leasehold Property, Revaluation, Revaluation Loss, Revaluation Surplus
Level: Level 2

Topic: Property, Plant, and Equipment (IAS 16)
Series: MAY 2019

CR – Nov 2023 – L3 – Q2b – IAS 37: Provisions, Contingent Liabilities and Contingent Assets

Advice on the depreciation adjustment and decommissioning cost for a plant in the books of Odehyieba Plc, including financial statement impacts.

Question

entity has decided to reduce the remaining useful life of the plant by 5 years. For the current year ended 30 April 2023, no entry has been made for depreciation on the plant, neither has there been any adjustments to decommissioning cost.

Item	Amount (GH¢)
Carrying value of the plant	6,000,000
Remaining useful life	11 years
Revaluation surplus	960,000
Provision for decommissioning	1,600,000

There is no change in the expected decommissioning cost except for the timing due to the change in useful life. The applicable discount rate is 11% per annum. Odehyieba Plc has a policy of transferring revaluation surplus to retained earnings only upon disposal.

Required:
Advise on the appropriate financial reporting treatment for the above in the books of Odehyieba Plc in the 2023 financial statements for the year ended 30 April 2023. (6 marks)

Answer

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Tags: Contingent Liabilities and Contingent Assets, Decommissioning Costs, Depreciation, Discount rate, Financial Reporting, Revaluation Surplus
Level: Level 3

Topic: IAS 37: Provisions, Contingent Liabilities and Contingent Assets
Series: NOV 2023

CR – Nov 2023 – L3 – Q2a – IAS 33: Earnings Per Share

Calculation of basic and diluted earnings per share for Tofiakwa Plc, and advice on depreciation and decommissioning cost for Odehyieba Plc.

Question

a) The following information was extracted from the financial statements of Tofiakwa Plc for the financial year-end 30 June 2023 to determine the year’s basic earnings per share and diluted earnings per share:

Item	Amount (GH¢)
Profit after tax from continuing operations	1,925,000
Non-controlling interests’ profit	200,000
Ordinary shares, 150,000 issued at GH¢2	300,000
(This figure includes an additional 50,000 ordinary shares issued on 1/10/2022 for cash)
5% non-cumulative preference shares, 500,000 issued at GH¢1	500,000
Average market price for one ordinary share during the year	15

Additional Information:

Tofiakwa Plc entered into a market transaction on 1 December 2022 to repurchase 12,000 ordinary shares at fair value.
20% convertible debentures: 4,000 debentures with an issue value of GH¢1,000 per debenture. Each debenture is convertible into ten ordinary shares. Holders of 3,800 convertible debentures converted their holdings into ordinary shares on 1 May 2023.
The tax rate is 30%.

Required:
For Tofiakwa Plc for the year ending 30 June 2023, calculate:
i) The basic earnings per share. (5 marks)
ii) The diluted earnings per share. (5 marks)

Answer

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Tags: Basic EPS, Convertible Debentures, Decommissioning Cost, Depreciation, Diluted EPS, Revaluation Surplus
Level: Level 3

Topic: IAS 33 - Earnings Per Share
Series: NOV 2023

CR – Dec 2022 – L3 – Q3a – IAS 36: Impairment of Assets ,IAS 37: Provisions, contingent liabilities and contingent assets

Determine the appropriate accounting treatment for Samed Ltd's production facility impairment.

Question

Samed Ltd is a Ghanaian company located in the Northern Region that manufactures goods such as washing machines, tumble dryers, and dishwashers. The manufacturing industry in Ghana is highly competitive with many products on the market. Samed Ltd’s current accounting year-end is 31 December 2022.

Samed Ltd has a production facility that started showing serious cracks and signs of possible leakage since July 2022. It is probable that Samed Ltd will have to undertake major repairs sometime during 2023 to rectify the problem. Samed Ltd does not have an insurance policy covering the production facility. The Chief Operating Officer has refused to disclose the issue in the financial statements for the year ended 31 December 2022, and no repair costs have yet been undertaken, although he is aware that this is contrary to International Financial Reporting Standards (IFRSs). According to the Chief Operating Officer, he does not believe that the need for major repairs on the production facility is an indicator of impairment. Furthermore, the Chief Operating Officer argues that no provision for the repair to the production facility should be made as there is no legal or constructive obligation to repair the facility.

Samed Ltd has a revaluation policy for property, plant, and equipment, and there is a balance on the revaluation surplus of GH¢20 million in the financial statements for the year ended 31 December 2022. However, this balance does not relate to the production facility, but the Chief Operating Officer is of the opinion that this surplus can be used for any future loss arising from the collapse of the production facility.

Required:
In accordance with relevant IFRSs, discuss the accounting treatment which Samed Ltd should adopt to account for the above transaction in its financial statements for the year ended 31 December 2022.
(5 marks)

Answer

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Tags: Cash-Generating Unit, Contingent Liabilities, Impairment, Production Facility, Provision, Revaluation Surplus
Level: Level 3

Topic: contingent liabilities and contingent assets, IAS 36: Impairment of assets
Series: DEC 2022

FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)

Preparation of extracts of the statement of profit or loss and statement of financial position for Chidinma Ventures Plc, accounting for leasehold property revaluation.

Question

Required:
Prepare extracts of the statement of profit or loss and statement of financial position for the year ended 30 September 2017 and 2018 in respect of the leasehold property.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Amortization, IAS 16, Leasehold Property, Revaluation, Revaluation Loss, Revaluation Surplus
Level: Level 2

Topic: Property, Plant, and Equipment (IAS 16)
Series: MAY 2019

CR – Nov 2023 – L3 – Q2b – IAS 37: Provisions, Contingent Liabilities and Contingent Assets

Advice on the depreciation adjustment and decommissioning cost for a plant in the books of Odehyieba Plc, including financial statement impacts.

Question

Item	Amount (GH¢)
Carrying value of the plant	6,000,000
Remaining useful life	11 years
Revaluation surplus	960,000
Provision for decommissioning	1,600,000

Required:
Advise on the appropriate financial reporting treatment for the above in the books of Odehyieba Plc in the 2023 financial statements for the year ended 30 April 2023. (6 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Contingent Liabilities and Contingent Assets, Decommissioning Costs, Depreciation, Discount rate, Financial Reporting, Revaluation Surplus
Level: Level 3

Topic: IAS 37: Provisions, Contingent Liabilities and Contingent Assets
Series: NOV 2023

CR – Nov 2023 – L3 – Q2a – IAS 33: Earnings Per Share

Calculation of basic and diluted earnings per share for Tofiakwa Plc, and advice on depreciation and decommissioning cost for Odehyieba Plc.

Question

Item	Amount (GH¢)
Profit after tax from continuing operations	1,925,000
Non-controlling interests’ profit	200,000
Ordinary shares, 150,000 issued at GH¢2	300,000
(This figure includes an additional 50,000 ordinary shares issued on 1/10/2022 for cash)
5% non-cumulative preference shares, 500,000 issued at GH¢1	500,000
Average market price for one ordinary share during the year	15

Additional Information:

Tofiakwa Plc entered into a market transaction on 1 December 2022 to repurchase 12,000 ordinary shares at fair value.
20% convertible debentures: 4,000 debentures with an issue value of GH¢1,000 per debenture. Each debenture is convertible into ten ordinary shares. Holders of 3,800 convertible debentures converted their holdings into ordinary shares on 1 May 2023.
The tax rate is 30%.

Required:
For Tofiakwa Plc for the year ending 30 June 2023, calculate:
i) The basic earnings per share. (5 marks)
ii) The diluted earnings per share. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Basic EPS, Convertible Debentures, Decommissioning Cost, Depreciation, Diluted EPS, Revaluation Surplus
Level: Level 3

Topic: IAS 33 - Earnings Per Share
Series: NOV 2023

CR – Dec 2022 – L3 – Q3a – IAS 36: Impairment of Assets ,IAS 37: Provisions, contingent liabilities and contingent assets

Determine the appropriate accounting treatment for Samed Ltd's production facility impairment.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cash-Generating Unit, Contingent Liabilities, Impairment, Production Facility, Provision, Revaluation Surplus
Level: Level 3

Topic: contingent liabilities and contingent assets, IAS 36: Impairment of assets
Series: DEC 2022

Question Tag: Revaluation Surplus

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FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)

Preparation of extracts of the statement of profit or loss and statement of financial position for Chidinma Ventures Plc, accounting for leasehold property revaluation.

CR – Nov 2023 – L3 – Q2b – IAS 37: Provisions, Contingent Liabilities and Contingent Assets

Advice on the depreciation adjustment and decommissioning cost for a plant in the books of Odehyieba Plc, including financial statement impacts.

CR – Nov 2023 – L3 – Q2a – IAS 33: Earnings Per Share

Calculation of basic and diluted earnings per share for Tofiakwa Plc, and advice on depreciation and decommissioning cost for Odehyieba Plc.

CR – Dec 2022 – L3 – Q3a – IAS 36: Impairment of Assets ,IAS 37: Provisions, contingent liabilities and contingent assets

Determine the appropriate accounting treatment for Samed Ltd's production facility impairment.

FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)

Preparation of extracts of the statement of profit or loss and statement of financial position for Chidinma Ventures Plc, accounting for leasehold property revaluation.

CR – Nov 2023 – L3 – Q2b – IAS 37: Provisions, Contingent Liabilities and Contingent Assets

Advice on the depreciation adjustment and decommissioning cost for a plant in the books of Odehyieba Plc, including financial statement impacts.

CR – Nov 2023 – L3 – Q2a – IAS 33: Earnings Per Share

Calculation of basic and diluted earnings per share for Tofiakwa Plc, and advice on depreciation and decommissioning cost for Odehyieba Plc.

CR – Dec 2022 – L3 – Q3a – IAS 36: Impairment of Assets ,IAS 37: Provisions, contingent liabilities and contingent assets

Determine the appropriate accounting treatment for Samed Ltd's production facility impairment.

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Question Tag: Revaluation Surplus

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FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)

Preparation of extracts of the statement of profit or loss and statement of financial position for Chidinma Ventures Plc, accounting for leasehold property revaluation.

You're reporting an error for "FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)"

CR – Nov 2023 – L3 – Q2b – IAS 37: Provisions, Contingent Liabilities and Contingent Assets

Advice on the depreciation adjustment and decommissioning cost for a plant in the books of Odehyieba Plc, including financial statement impacts.

You're reporting an error for "CR – Nov 2023 – L3 – Q2b – IAS 37: Provisions, Contingent Liabilities and Contingent Assets"

CR – Nov 2023 – L3 – Q2a – IAS 33: Earnings Per Share

Calculation of basic and diluted earnings per share for Tofiakwa Plc, and advice on depreciation and decommissioning cost for Odehyieba Plc.

You're reporting an error for "CR – Nov 2023 – L3 – Q2a – IAS 33: Earnings Per Share"

CR – Dec 2022 – L3 – Q3a – IAS 36: Impairment of Assets ,IAS 37: Provisions, contingent liabilities and contingent assets

Determine the appropriate accounting treatment for Samed Ltd's production facility impairment.

You're reporting an error for "CR – Dec 2022 – L3 – Q3a – IAS 36: Impairment of Assets ,IAS 37: Provisions, contingent liabilities and contingent assets"

FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)

Preparation of extracts of the statement of profit or loss and statement of financial position for Chidinma Ventures Plc, accounting for leasehold property revaluation.

You're reporting an error for "FR – May 2019 – L2 – Q4c – Property, Plant, and Equipment (IAS 16)"

CR – Nov 2023 – L3 – Q2b – IAS 37: Provisions, Contingent Liabilities and Contingent Assets

Advice on the depreciation adjustment and decommissioning cost for a plant in the books of Odehyieba Plc, including financial statement impacts.

You're reporting an error for "CR – Nov 2023 – L3 – Q2b – IAS 37: Provisions, Contingent Liabilities and Contingent Assets"

CR – Nov 2023 – L3 – Q2a – IAS 33: Earnings Per Share

Calculation of basic and diluted earnings per share for Tofiakwa Plc, and advice on depreciation and decommissioning cost for Odehyieba Plc.

You're reporting an error for "CR – Nov 2023 – L3 – Q2a – IAS 33: Earnings Per Share"

CR – Dec 2022 – L3 – Q3a – IAS 36: Impairment of Assets ,IAS 37: Provisions, contingent liabilities and contingent assets

Determine the appropriate accounting treatment for Samed Ltd's production facility impairment.

You're reporting an error for "CR – Dec 2022 – L3 – Q3a – IAS 36: Impairment of Assets ,IAS 37: Provisions, contingent liabilities and contingent assets"

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