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.