Question

Under IFRS, the initial revaluation of equipment when book value exceeds fair value results in

a) An increase in net income.
b) A decrease in net income.
c) An increase in other comprehensive income.
d) A decrease in other comprehensive income.

Answer 1

Under IFRS, the initial revaluation of equipment when book value exceeds fair value results in d) a decrease in other comprehensive income.

Step-by-step explanation:

Under IFRS, when the book value of equipment exceeds the fair value, the initial revaluation results in a decrease in other comprehensive income (OCI).

Other comprehensive income consists of gains and losses that are not included in net income.

So, when the revaluation reduces the value of the equipment, it leads to a decrease in OCI as the equipment's fair value decreases. This decrease in OCI is reported in the statement of changes in equity.