Italy IAS 16 (Property - Plant - Equipment) - Simple exercise


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Hello Everyone!
I am having trouble understanding a simple exercise on IAS 16.

On January 1st 2015, a company buys a Plant for €21.000
Expected life=3 years
Final value=0
Expected Amortization = 7.000 per Year

Fair Value on 31st December 2015 = 11.200
Fair Value on 31st December 2016 = 7.840

I have to apply the revaluation model

The solution is in the attached image.

The thing that I do not understand is why I cannot record a profit of 2240 in 2016,after revaluation while I have to split it into two parts:
- Profits: 1400
- Revaluation Surplus: 840

Thanks in advance to whoever will be so polite to reply me,
Michele
 

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Triest123

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According to IAS36, the reverse of impairment loss that can be recognised in the income statement (i.e. the gain on valuation) is limited to increasing the carrying value of an asset to the carrying value at which the impairment had not been occurred.
The carrying amount of the equipment at 31 Dec 2016 if the impairment had not been occurred :
Carrying amount at 1 Jan 2016 14,000
Depreciation for the year 2016 (7,000) ($21,000 / 3 years)
Carrying amount at 31 Dec 2016 7,000

So, the gain on valuation is $7,000 - $5,600 = $1,400
 
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