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1. Under the revaluation model, an item of property,

plant and equipment whose fair value can be

measured reliably shall be carried at a revalued

amount. Revalued amount means

a. Fair value at the date of the revaluation.

b. Fair value at the date of the revaluation less any

accumulated depreciation and any accumulated

impairment losses.

c. Fair value at the date of the revaluation less any

subsequent accumulated depreciation and

subsequent accumulated impairment losses.

d. Cost less any accumulated depreciation and

accumulated impairment losses.

2. Which statement is correct regarding the revaluation

model?

a. Revaluations shall be made with sufficient

regularity to ensure that the carrying amount does

not differ materially from that which would be

determined using fair value at the end of the

reporting period.

b. The frequency of revaluations depends upon the

changes in fair values of the items of property,

plant and equipment being revalued.

c. If an item of property, plant and equipment is

revalued, the entire class of property, plant and

equipment to which that asset belongs shall be

revalued.

d. All of the above.

3. XYZ Inc. owns a fleet of over 100 cars and 20 ships. It

operates in a capital-intensive industry and thus has

significant other property, plant, and equipment that it

carries in its books. It decided to revalue its property,

plant, and equipment. The company's accountant has

suggested the alternatives that follow. Which one of

the options should XYZ Inc. select in order to be in line

with the provisions of PAS 16?

a. Revalue only one-half of each class of property,

plant, and equipment, as that method is less

cumbersome and easy compared to revaluing all

assets together.

b. Revalue one ship at a time, as it is easier than

revaluing all ships together.

c. Revalue an entire class of property, plant, and

equipment.

d. Since assets are being revalued regularly, there is

no need to depreciate.

4. Annual revaluation is required for items of property,

plant and equipment

a. That experience significant and volatile changes in

fair value.

b. When fair value differs materially from its carrying

amount.

c. With only insignificant changes in fair value.

d. In all cases.

5. PRTC Ltd. uses the revaluation model for its head

office building, which was acquired on January 1,

2019. At the end of 2019, the fair value of the

building was lower than its carrying value by

P500,000.

At the end of 2020, fair value had increased such that

its fair value was only P100,000 less than its carrying

value.

Which of the following is true regarding the use of the

revaluation model by PRTC for its building?

a. Revaluation would be required to be done annually

by PRTC.

b. The decrease in fair value in 2019 would be

recorded in other comprehensive income.

c. The increase in fair value in 2020 would be

recorded in other comprehensive income.

d. Depreciation would be taken annually prior to any

revaluation by PRTC.

LECTURE NOTES:

Accounting for Revaluation Increase (FV > CA)

Not previously impaired:

Income in OCI and accumulated in equity as

revaluation surplus

Previously impaired:

Income in P/L as reversal of impairment loss

Excess (over the limit) income in OCI

Accounting for Revaluation Decrease (FV < CA)

Not previously revalued:

Expense in P/L as revaluation loss

Previously revalued:

Expense in OCI to the extent of any credit balance

existing in the revaluation surplus in respect of that

asset

Excess is expense in P/L as revaluation loss

Use the following information for the next five questions.

On December 31, 2019, the statement of financial position

of Twitter Corporation showed the following property and

equipment after charging depreciation:

Building P3,000,000

Accumulated depreciation (1,000,000) P2,000,000

Equipment 1,200,000

Accumulated depreciation (400,000) 800,000

The company has adopted the revaluation model for the

valuation of property and equipment. This has resulted in

the recognition in prior periods of an asset revaluation

surplus for the building of P140,000. The company does

not make a transfer to retained earnings in respect of

realized revaluation surplus.

On December 31, 2019, an independent valuer assessed

the fair value of the building to be P1,600,000 and the

equipment to be P900,000. The building and equipment

had remaining useful lives of 25 years and 4 years,

respectively, as of that date.

6. The amount to be recognized in profit or loss for 2019

related to the revaluation of property and equipment is

a. P100,000 c. (P260,000)

b. (P160,000) d. (P300,000)

7. Which statement is incorrect regarding 'realized'

revaluation surplus?

a. It may be transferred directly to retained earnings.

b. It may be left in equity under the heading

revaluation surplus.

c. The transfer to retained earnings should not be

made through profit or loss.

d. None, all the statements are correct.

8. The revaluation surplus as of December 31, 2020 is

a. P140,000 c. P75,000

b. P100,000 d. P 0

9. Depreciation, if applicable, is recognized under

Cost Model Revaluation Model

a. Yes Yes

b. Yes No

c. No Yes

d. No No

10. The carrying amount of property and equipment as of

December 31, 2020 is

a. P2,500,000 c. P2,080,000

b. P2,400,000 d. P2,211,000