Question

IAS 38. Intangible Assets. On March 1, 2016, we obtained a patent for 7,500
euros.
At the close of the fiscal year, on December 31, 2016, the fair value of the patent was 9,000 euros.
As of December 31, 2017, the fair value of the patent stands at 8,000 euros.
The criterion we use for valuation after the initial recognition of the asset is the
revaluation model.
Formulate:
‒ Make the accounting entries corresponding to the acquisition of the asset
and at each accounting close.

Answer 1

Under Revaluation model, asset has to be reported at fair value in balance sheet. Thus attached are the entries to be posted at each accounting close: On Dec 31, 2016, asset value has to be reported as EUR 9000, thus entry has to be posted for difference between Eur 7500 & Eur 9000 = Eur 1500. Accordingly, the asset value has to be reduced by Eur1000 on Dec 31 2017 in order to report asset value at Eur 8000.

Debit Credit 7,500.00 | 7,500.00 1,500.00 Date Dr./Cr. Account Title 01-Mar-16 Dr Intangible Asset - Patent Cr Cash (or) Accounts Payable (to record acquisition of asset) 31-Dec-16 Dr Intangible Asset - Patent Cr Revaluation Reserve (to record asset under fair market value) 31-Dec-17 Dr Revaluation Reserve Intangible Asset - Patent (to record asset under fair market value) 1,500.00 1,000.00 Cr | 1,000.00