AirFrance IFRS comprehensive case part B B4. AF\'s property, plant, and equipmen

Question

AirFrance IFRS comprehensive case part B

B4. AF's property, plant, and equipment is reported at cost. The company has a policy of not revaluing property, plant, and equipment. Suppose AF decided to revalue its flight equipment on December 31, 2013 and that the fair value of the equipment on that date was €10,000 million. Prepare the journal entry to record the revaluation assuming that the journal entry to record annual depreciation had already been recorded. (Hint: you will need to locate the original cost and accumulated depreciation of the equipment at the end of the year in the appropriate disclosure note.)

B5. Under U.S. GAAP, what alternatives do companies have to value their property, plant, and equipment?

B6. AF calculates depreciation of plant and equipment on a straight-line basis, over the useful life of the asset. Describe any differences between IFRS and U.S. GAAP in the calculation of depreciation

Explanation / Answer

B4) Journal entry to record the revaluation of the assets at the fair value:

Debit Assets $ ( with new fair value)

Debit Accumulated Depreciation $ (upto the fair valuation on the asset)

Debit/Credit Loss/Gain on revaluation $ (balancing figure)

Credit Assets (old valuation) $(old value of the assets)

B5) The alternatives which a company can adopt to value their property , plant and equiptment are the same as pre-said i.e value the assets with the fair value and book the gain or loss on such revaluation in the books and pay the taxes on the gain or loss so attained.

B6) AF calculates depreciation of plant and equipment on a straight-line basis, over the useful life of the asset. As per the IFRS, the depreciation should be calculated according to the MACRS depreciation table for tax purpose, though the company keep on maintaining the depreciation on the basis as defined under U.S. GAAP, as AF is calculating the depreciation on the straight-line basis. .

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