User talk:Lakeishacpa

At the end of my 2005 fiscal year I revalued my fixed assets using the following entry: Building, etc (Dr), Revaluation Surplus (Cr).

The accounting firm that is reviewing my financial statements for the 2006 fiscal year is requesting that I depreciate the revalued balance of my fixed assets rather than the original cost via Depreciation Expense and realise the surplus either upon disposal of the assets or over the life of the asset.

I read IAS 16-34 through 16-39, which gives an option of realising the revaluation surplus via Retained Earnings. This being the case, it seems only logical to depreciate the original cost via Depreciation Expense and the revalued portion of the asset directly via Retained Earnings. It seems rather unfair for my current Profit and Loss to reflect an expenditure for something for which there was no cash outlay.

In summary, my accounting firm is requesting the following entry:

Depreciation: Depreciation Expense (Dr), Accumulated Depreciation (Cr) Disposal: Accumulated Depreciation (Dr), Building, etc (Cr), Revaluation Surplus (Dr), Retained Earnings (Cr)

However, I propose the following entry:

Depreciation: Depreciation Expense (Dr), Retained Earnings (Dr), Accumulated Depreciation Disposal: Accumulated Depreciation (Dr), Building, etc (Cr), Revaluation Surplus (Dr), Retained Earnings (Cr)

Would someone kindly let me know if my logic is acceptable or does my Profit and Loss statement have to suffer the additional depreciation expense as per the accounting firm's suggestion.

Thank you kindly for your help.

Signed, La-Keisha.