Page 23 - 3. COMPILER QB - INDAS 16

―Revaluation reserve account‖ will be debited by Rs. 1,75,000 and ―Profit and Loss Account‖ will be debited by
Rs. 31,250.

WORKING NOTES:
1. Calculation of useful life of machinery on 1.4.2011
Depreciation charge in 5 years = (30 lakh – 17.5 lakh) = Rs. 12.5 lakh
Depreciation per year as per
Straight Line method = 12.5 lakh/5 years = Rs. 2.5 lakh

Remaining useful life = Rs. 17.5 lakh / Rs. 2.5 lakh = 7 years
Total useful life = 5 years + 7 years = 12 years

2. Depreciation after upward revaluation as on 31.3.2016
Book value as on 1.4.2016 =17.5 lakh

Add: 10% upward revaluation =1.75 lakh
Revalued amount 19.25 lakh
Remaining useful life 7 years (Refer W.N.1)
Depreciation on revalued amount = 19.25 / 7 years = Rs. 2.75 lakh

3. Depreciation after downward revaluation as on 31.3.2018

Book value as on 1.4.2018 =13.75 lakh
Less: 15% Downward revaluation = (2.0625 lakh)
Revalued amount 11.6875 lakh
Revised useful life 8 years

Depreciation on revalued amount = 11.6875 / 8 years = Rs. 1.46094 lakh

Q15. (Jan. 21 - 5 Marks)- (Mix of IndAS 16 & IndAS 40)

On 1st April 2019, an entity purchased an office block (building) for Rs. 50,00,000 and paid a non-refundable
property transfer tax and direct legal cost of Rs. 2,50,000 and Rs. 50,000 respectively while acquiring the
building.
During 2019, the entity redeveloped the building into two-story building. Expenditures on re-development
were:

● Rs. 1,00,000 Building plan approval;
● Rs. 10,00,000 construction costs (including Rs. 60,000 refundable purchase taxes); and
● Rs. 40,000 due to abnormal wastage of material and labour.
When the re-development of the building was completed on 1st October 2019, the entity rents out Ground
Floor of the building to its subsidiary under an operating lease in return for rental payment. The subsidiary
uses the building as a retail outlet for its products. The entity kept first floor for its own administration and

maintenance staff usage. Equal value can be attributed to each floor.
How will the entity account for all the above-mentioned expenses in the books of account?
Also, discuss how the above building will be shown in Consolidated financial statement of the entity as a
group and in its separate financial statements as per relevant Ind AS.

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