Hi, i might sound a bit crazy here but i am so confused by the revaluation, valuation allowance and what goes to equity and what not, can someone help me summarize this clearly?
Equity = contributed + earned + changes in capital surplus.
Under IFRS revaluation means adjustment book to market value of
long term asset. Increasing an asset value in Asset part of BS has
increase in same amount in Equity part of BS named a revaluation surplus
or revaluation reserve account (assuming no tax impact in this example).
Valuation allowance has nothing with revaluation. Under USGAAP valuation
allowance account offsets amount of DTA which is supposed that not be
reversed in the future.
@Flashback, on the basis of the knowledge you’re sharing, if I were to bet on the one candidate who would guaranteedly pass Level 1 this December, it would be you.
Rayquaza, many thanks for good wishes. FRA is an area which is quite familiar to me, anyway I had to learn USGAAP requirements. There are many interesting things within other areas, especially Fixed Income and Derivatives which improved my overall knowledge. I hope I will pass, also wishing same to you and anybody on this forum. This forum is excellent training ground since I don’t know anbody in my neighborhood who is currently preparing CFA L1.
Thank you. Yeah the same goes for me too. Even, I don’t happen to know much of people in my regionality who have opted for CFA. This is primarily due to the Course being quite tough and more importantly more expensive. So sometimes for understanding something and due to lack of availability of people to rely on, I often come here to ask my doubts. And thankfully, people like you and the Great Lord “S2000Magician” are quite helpful in clearing the doubts. So, wish you all the best too 
thanks!
so in general US GAAP doesnt allow write up and IFRS allow write up to previous level,
in what situtaion
-
us gaap allow write up? i remember there is one?
-
ifrs allow write up beyond previous level (investment property?) and where does those cost go?
- Inventory
USGAAP
Writting-up not permitted
IFRS
Permitted but only only to amount of original value prior writting-down.
- Long Term - Intangible Assets Goodwill & Other Indefinite Lived
USGAAP
Not permitted for all.
IFRS
Not permitted for Goodwill. Other indenfinite lived LT Intangibles permitted to value of previous impairment loss.
- Long Term - Tangible Assets
USGAAP
Not permitted.
IFRS
Permitted to level of prior recognized loss.
- Financial Assets - AFS class
USGAAP
Unrealized gains/losses (both direction) are shown in equity. Impairment procedure separetly prescribed for various financial assets classes (FI, Equities, Derivatives etc.).
IFRS
Unrealized gains/losses (both direction) are shown in equity.
- LTA - Investement property
USGAAP does not distuingish this category from another tangible assets so treatment is same as for other LTA - Tangibles.
IFRS
Investment property recognized as Real Estates held for long term for rent purpose.
Subject may choose how to measure this class. If one subject choose fair value model instead amortizing cost model, the treatment is revaulation model. Revaluation surplus account must be created to recognize loss of impairment in Equity, this exactly means that prior to reognizinig loss of impairment, asset should be revalued to higher amount that initial cost, otherwise the losses are shown in P/L. Loss reversals are permitted.
I believe agriculture is the only one allowed a revaluation method under GAAP.