Page 6 - 3. COMPILER QB - INDAS 16

SOLUTION

According to Ind AS 16, when an item of property, plant and equipment is revalued, the carrying amount of that

asset is adjusted to the revalued amount. At the date of the revaluation, the asset is treated in one of the
following ways:

(a) The gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying
amount of the asset. For example, the gross carrying amount may be restated by reference to observable

market data or it may be restated proportionately to the change in the carrying amount. The accumulated
depreciation at the date of the revaluation is adjusted to equal the difference between the gross carrying

amount and the carrying amount of the asset after taking into account accumulated impairment losses; or
(b) The accumulated depreciation is eliminated against the gross carrying amount of the asset.

The amount of the adjustment of accumulated depreciation forms part of the increase or decrease in
carrying amount that is accounted for in accordance with Ind AS 16.

If the Company opts for option (a), then the revised carrying amount of the machinery will be:

Particulars W.N. Amount

Gross carrying amount [(200/120) x 150] Rs 250

Net carrying amount Rs150

Accumulated depreciation (Rs 250 – Rs 150) Rs 100

Plant and Machinery A/c (Gross Block) Dr. Rs. 50

To Accumulated Depreciation Rs. 20

To Revaluation Reserve Rs. 30

If the balance of accumulated depreciation is eliminated as per option (b), then the revised carrying amount of
the machinery will be as follows:

Gross carrying amount is restated to Rs150 to reflect the fair value and Accumulated depreciation is set at zero.
Journal entry

Accumulated Depreciation Dr. Rs 80
To Plant and Machinery A/c (Gross Block) Rs 80

Plant and Machinery A/c ( Gross Block) Dr. Rs. 30
To Revaluation Reserve Rs. 30

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