Creative Ltd. performed a revaluation of all of its plant and machinery at the beginning of 1st April, 2024. The following information relates to…

According to paragraph 35 of Ind AS 16, when an item of property, plant and equipment is revalued, the carrying amount of that asset is adjusted to the revalued amount. At the date of the revaluation, the asset is treated in one of the following ways: (i) The gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount of the asset. The accumulated depreciation at the date of the revaluation is adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset after taking into account accumulated impairment losses. In such a situation, the revised carrying amount of the machinery will be as follows: Gross carrying amount - 5,00,000 [(4,00,000/2,40,000) x 3,00,000] Less: Net carrying amount (₹ 3,00,000) Accumulated depreciation - 2,00,000 (1,60,000 + 40,000) Journal Entry ₹ Plant and Machinery (Gross Block) Dr. 1,00,000 To Accumulated Depreciation 40,000 To Revaluation Reserve 60,000 (Being the value of gross block of the asset restated to make it consistent with revalued amount) Depreciation subsequent to revaluation Since the Gross Block has been restated, the depreciation charge will be revised to 50,000 per annum (₹ 5,00,000 /10 years). Journal Entry ₹ Deprecation Dr. 50,000 To Accumulated Depreciation 50,000 (Being the revised depreciation after revalued charged) (ii) The accumulated depreciation is eliminated against the gross carrying amount of the asset. The amount of the adjustment of accumulated depreciation forms part of the increase or decrease in carrying amount that is accounted for in accordance with paragraphs 39 and 40 of Ind AS 16. In this case, the gross carrying amount is restated to 3,00,000 to reflect the fair value and accumulated depreciation is set at zero. Journal Entry ₹ Accumulated Depreciation Dr. 1,60,000 To Plant and Machinery (Gross Block) 1,60,000 (Being the asset brought down to the carrying value) Plant and Machinery (Gross Block) Dr. 60,000 To Revaluation Reserve 60,000 (Being revaluation of the asset recognised) Depreciation subsequent to revaluation Since the revalued amount is the revised gross block, the useful life to be considered is the remaining useful life of the asset which results in the same depreciation charge of 50,000 per annum as per Option A (3,00,000 / 6 years). Journal entry ₹ Deprecation Dr. 50,000 To Accumulated Depreciation 50,000 (Being the revised depreciation charged to the Gross Block)