06-04-2009, 03:42 AM
Irfan , your concepts regarding prudence needs rectification since prudence does not apply on the revaluation of any asset rather prudence restricts to recognize any gain, which may arise by sale of any asset in the future period of time.Furthermore, if the value of any asset is overstated or understated then it would never variate the income level. In this regard, the followings are being quoted for the purpose of revaluation purpose.
<b>As per IAS 36</b> "Impairment of Assets" Each asset needs to be cheaked for atleast once in a year that wheather it has been impaired or not , in either case, a revaluation reserve account is created & gains due to revaluation is shown in that account.
<b>As per Company Ordinance 1984</b> , if the value of any asset is revaluated then the same gain is credited to the account called "Surplus On The Revaluation Of Fixed Asset" on the equity side of the balance sheet just after "Capitl & Reserve account" & such a gain can never be treated as a part of income rather it shall be offset against the loss on the revaluation of another fixed asset, any incremental depreciation arising out of revaluation of fixed asset may also be charged to the said account, furthermore, it shall have to be shown in the same way unless fully offset as per rule specified in the ordinance.
Also note that wheather a company borrows short term loan or long term loan, in either case, liquidity position (Cash position) shall decline whenever borrower pays its obligation.
Best Ragards,
<b>As per IAS 36</b> "Impairment of Assets" Each asset needs to be cheaked for atleast once in a year that wheather it has been impaired or not , in either case, a revaluation reserve account is created & gains due to revaluation is shown in that account.
<b>As per Company Ordinance 1984</b> , if the value of any asset is revaluated then the same gain is credited to the account called "Surplus On The Revaluation Of Fixed Asset" on the equity side of the balance sheet just after "Capitl & Reserve account" & such a gain can never be treated as a part of income rather it shall be offset against the loss on the revaluation of another fixed asset, any incremental depreciation arising out of revaluation of fixed asset may also be charged to the said account, furthermore, it shall have to be shown in the same way unless fully offset as per rule specified in the ordinance.
Also note that wheather a company borrows short term loan or long term loan, in either case, liquidity position (Cash position) shall decline whenever borrower pays its obligation.
Best Ragards,
