Question

Under IFRS, when a company chooses the revaluation model as its accounting policy for measuring property, plant, and equipment, which of the following statements is correct?

a) When an asset is revalued, the entire class of property, plant, and equipment to which the asset belongs must be revalued.
b) When an asset is revalued, individual assets within a class of property, plant, and equipment to which that asset belongs can be revalued.
c) Revaluations of property, plant, and equipment must be made every three years.
d) An increase in an asset's book value as a result of the first revaluation must be recognized as a component of profit and loss.

Answer 1

Under IFRS, individual assets within a class of property, plant, and equipment can be revalued. An increase in an asset's book value as a result of the first revaluation must be recognized as a component of profit and loss. There is no specific requirement for revaluations every three years under IFRS.

Step-by-step explanation:

Under IFRS, when a company chooses the revaluation model as its accounting policy for measuring property, plant, and equipment, individual assets within a class of property, plant, and equipment to which that asset belongs can be revalued. This means that not the entire class of assets needs to be revalued when one asset is revalued.

The statement that says an increase in an asset's book value as a result of the first revaluation must be recognized as a component of profit and loss is correct. This means that when the asset is revalued and its book value increases, the increase in value should be included in the company's profit and loss statement.

There is no requirement under IFRS that says revaluations of property, plant, and equipment must be made every three years. The timing of revaluations is determined by the company's accounting policy and management judgment.