Date

Particular

Dr

1/1/2006 Cash Assets (Building)

Revaluation Model Cr Balance sheet Cash goes down and Buildings go 100000 up 100000 Asset value increase and is taken directly to revaluation reserve 30000 20000 20000 60000

12/31/2006 Asset(Building)

30000

Revaluation Reserve
12/31/2007 Asset(Building)

Revaluation Reserve
12/31/2008 Asset

Revaluation reserve Impairment charge (I/S)

10000 50000
Cost Model Cr Balance sheet Cash goes down and Buildings go 100000 up 100000 Depreciation is reflected in B/S. Net book value of building is now 10000 90k. Depreciation is reflected in B/S. Net book value of building is now 10000 80k. Net book value of asset reduced to 10000 50K Depreciation rises by 10k and 20000 impairment is doen for 20k

Date

Particular

Dr

1/1/2006 Cash Assets (Building)

12/31/2006 Depreciation (Building) Depreciation Expense(Building)

10000

12/31/2007 Depreciation (Building) Depreciation Expense(Building) 12/31/2008 Depreciation Accumulated Impairment

10000

Date 1/1/2006

Particular Cash Assets (Building)

Dr

Fair Value Model Cr Balance sheet Cash goes down and Buildings go up 100000 Asset value increases and is balanced by increase in Retained Earning 30000

100000

12/31/2006 Asset(Building) Retained Earnings (Due to Unrealized holding gains)

30000

12/31/2007 Asset(Building) unrealized loss. 12/31/2008 Asset Unrealized holding loss

20000 20000 60000 60000

Asset value decreases by 20k. This is balanced by decrease in Retained earning due to unrealized holding loss

60k unrealized holding loss)

Income Statement No Effect

No Effect

No Effect

Impairment charges of 50000 shown as loss

Income Statement No Effect Depreciation amount is reported as expense on I/S. Depreciation amount is reported as expense on I/S.

Impairment loss = 20k depreciation expense = 10k

Income Statement No Effect

30k profit accounted to Unrealised holding gains

20k of loss reported (unrealized holding loss)

Unrealised holding loss = 60k