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    Question

    If an entity revalues its land upward and this is the

    first time revaluation is being done, how is the increase treated under Ind AS 16?
    A Recognised in Profit or Loss account as profit Correct Answer Incorrect Answer
    B Recognised in OCI and accumulated under revaluation surplus Correct Answer Incorrect Answer
    C Adjusted against retained earnings in the Balance Sheet Correct Answer Incorrect Answer
    D Recognised in P&L and taken to capital reserve directly Correct Answer Incorrect Answer
    E Ignored in books Correct Answer Incorrect Answer

    Solution

    Under Ind AS 16 (Property, Plant and Equipment), when an asset's carrying amount is increased as a result of a revaluation, the increase must be recognised in Other Comprehensive Income (OCI) and accumulated in equity under the heading of revaluation surplus.  ·        Initial Revaluation: If it is the first time the asset is being revalued and it results in an upward movement, it cannot be taken to the P&L because it is an unrealised gain. ·        Exception: The only time an upward revaluation is recognised in Profit or Loss is if it reverses a revaluation decrease of the same asset previously recognised in Profit or Loss.

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