Question III (a) A director of Danish, a public listed company, has expressed concerns about the accounting treatment of some of the company's items of property, plant and equipment which have increased in value. His main concern is that the statement of financial position does not show the true value of assets which have increased in value and that this 'undervaluation' is compounded by having to charge depreciation on these assets, which also reduces reported profit. He argues that this does not make economic sense. Required: Respond to the director's concerns by summarizing the principal requirements of IAS 16 Property, Plant and Equipment in relation to the revaluation of property, plant and equipment, including its subsequent treatment. (10 marks) (b) The following details relate to two items of property, plant and equipment (X and Y) owned by Dana which are depreciated on a straight-line basis with no estimated residual value: Estimated useful life at acquisition Cost on 1 April 2010 Accumulated depreciation (two years) Page 11 of 12 Item X 8 years $'000 240,000 (60,000) Item Y 6 years $'000 120,000 (40,000) Carrying amount at 31 March 2012 Required: Prepare extracts from: Revaluation on 1 April 2012: Revalued amount Revised estimated remaining useful life Subsequent expenditure capitalized on 1 April 2013 At 31 March 2014 item A was still in use, but item 8 was sold (on that date) for $70 million. Note: Delta makes an annual transfer from its revaluation surplus to retained earnings in respect of excess depreciation. 180,000 (1) 10 marks (i) 10 marks 160,000 Page 12 of 12 80,000 5 years nil (1) Dana's statements of profit or loss for the years ended 31 March 2013 and 2014 in respect of charges (expenses) related to property, plant and equipment: 112,000 5 years 14,400 (1) Dana's statements of financial position as at 31 March 2013 and 2014 for the carrying amount of property, plant and equipment and the revaluation surplus. The following mark allocation is provided as guidance for this requirement: (20 marks)