Accounting · Revaluation Surplus
An entity revalues its buildings upwards from their historical carrying amount. The entity adopts the policy of making an annual transfer of 'excess depreciation' between the revaluation surplus and retained earnings. Which of the following statements is CORRECT regarding the accounting treatment upon the subsequent disposal of these buildings?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The revaluation surplus must be used to offset any loss on disposal in the Statement of Profit or Loss before any remaining amount is transferred to retained earnings.
- 2The remaining balance of the revaluation surplus at the date of disposal is transferred directly to retained earnings within the Statement of Changes in Equity.✓
- 3The remaining balance of the revaluation surplus at the date of disposal is transferred to the Statement of Profit or Loss to calculate the final gain or loss on disposal.
- 4The total revaluation surplus remains in equity and can never be transferred to retained earnings after disposal.
Correct answer
The remaining balance of the revaluation surplus at the date of disposal is transferred directly to retained earnings within the Statement of Changes in Equity.
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