Discuss the accounting treatment for the scenario

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Question 1 - DND Corporation acquired a piece of land for $4 million on 1 January 2018. The revaluation model was adopted. The fair values of the land as of 31 December 2018, 31 December 2019 and 31 December 2020 were $4.8 million, $5.1 million and $4.2 million respectively. On 1 June 2021, the land was sold for $4.6 million.

Required - Discuss the accounting treatment for the above scenario in accordance with IAS16 Property Plant and Equipment. Ignore the deferred tax effects.

Question 2 - RB Enterprise purchased a piece of land on 1 January 2015 for $6 million. It is the policy of the company to use the revaluation model to account for its land. The revaluation exercise is carried out at an interval of 5 years. On 31 December 2019, an independent valuer valued the land at $8.5 million. The board of directors decided to incorporate this amount in the statement of financial position and to transfer the surplus to the statement of profit or loss.

Required - Briefly explain whether the action by the board of directors is appropriate or not.

Reference no: EM133134490

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