Exam 6: Revaluation and Impairment Testing of Non-Current Assets

AASB 116 requires entities to review at least at the end of each annual reporting period to assess if the fair value of the non-current assets has changeD.

Which of the following statement is true of accumulated depreciation?

Revaluations increments are often a source of discussion because:

Where the value of revalued non-current assets does not change frequently and is not material, AASB 116 suggests that revaluations:

Depreciation method used and depreciation rates are required to be disclosed for taxation purposes.

AASB 116 prescribes that, if assets within the same class are revalued and some assets increased in value while others decreased in value:

Which of the following statement is true of revaluation model in AASB 116?

A sale of property plant and equipment requires the derecognition of the carrying amount of the asset and any cost of replacement part capitalised.

Peters Ltd has a machine that originally cost $20,000 and has accumulated depreciation of $5,000. Its remaining life is assessed to be 5 years with no salvage value. The directors of Peters Ltd decide on 1 July 2003 to revalue the machine. They are unable to find market information on a machine in a similar state to theirs, so the market value of a new machine of the same type, $30,000, is used as a basis. What is/are the appropriate journal entry(ies) to record the revaluation?

When an entity adopts the valuation model to account for its property, plant and equipment, which of the following statement(s) is/are correct?

The process of discounting future cash flows in calculating the recoverable amount of an asset will result in a higher recoverable amount than if the cash flows are not discounteD.

Brahms Ltd acquired a property of land and building for $1.5 million. Management estimates the value of land to be 40% of cost. The building is estimated to have a useful life of 50 years. After 25 years, the property was revalued at 1.2 million. It is expected that the life of building will remain the same and salvage value is expected to be $100,000. What is the revaluation gain(loss) for building and the depreciation expense one year after revaluation?

Positive accounting theory suggests that the revalution model is income increasing because the credit is asset revaluation reserve:

AASB 116 requires that where the replacement cost of a non-current asset is less than its carrying value, the asset should be written down to its replacement cost:

The costs associated with revaluing assets include:

By permitting some classes of assets to be valued at cost and others at fair value the AASB has:

Purple Co Ltd purchased an item of land 3 years ago at a cost of $700 000. Two years ago the recoverable value of the land was considered to be $550 000. In the current period the land is revalued and the fair value is now $750 000. What is the treatment of the change in value in each of the periods?

The fair value of a non-current asset is defined in AASB 116 as the gross amount for which the asset can be sold when the entity is preparing to liquidate:

Palm Beach Ltd has elected to adopt the allowed alternative treatment to account for some of its property, plant and equipment. The information available for the class of assets the entity wishes to covert to revaluation model follows: Which of the following statements are correct if Palm Beach Ltd is to comply with AASB 116?