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September 2020 - question 19 i)

N

nadiah

Member
Hi, may I know why the loss on revaluation is added under cost of sales? I thought anything regarding revaluation is shown on comprehensive income statement and it is under the subheading of 'other comprehensive income' instead of the normal income statement?

Thank you in advance :)
 
This was an unusual revaluation question - the first of its kind I think. You are right that when a property is revalued UP the profit does not go in the p&l but is added in the statement of comprehensive income. If it is then subsequently revalued down again, it can be subtracted directly from this balance sheet reserve, avoiding the P&L again. But if it has never been valued up and is revalued DOWN, there is no reserve to write it off against. So its a loss in the P&L. Its a bit like an "impairment charge" against an asset that is not worth what it is shown at in the accounts.
 
Ah I see, that make sense. Thank you for the explanation. I really appreciate it :D
 
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