Under AASB 116 when an asset is revalued and the net method is used,accumulated depreciation:
A) must be written back to profit.
B) must be closed off to equity account.
C) should be eliminated against the gross carrying amount of the asset before revaluation.
D) should be increased by the same proportion as the gross carrying amount of the asset so that the carrying amount of the asset after revaluation equals the revalued amount.
E) None of the given answers.

Question

Quizplus · Accepted Answer

When an asset is revalued and the net method is used, accumulated depreciation should be eliminated against the gross carrying amount of the asset before revaluation. This is because the revaluation increases the carrying amount of the asset to its fair value, including any accumulated depreciation that had been charged to the asset previously. The net effect is to adjust the carrying amount of the asset to the new revalued amount. Therefore Option C is correct. The other options are incorrect as they either require writing back depreciation to profit (Option A), closing off depreciation to equity (Option B), or increasing depreciation proportionally with the gross carrying amount (Option D), which are not in compliance with the AASB 116 standard.

Under AASB 116 When an Asset Is Revalued and the Net