Question

IceCap Hotels operates a series of northern European hotels and reports under IFRS. On June 30, 2016, IceCap purchased land for €3,000,000. IceCap reports land values on the balance sheet under Property, plant, and equipment. The appraisal value for the land (which you can assume is the same as the recoverable amount) was reported as:

Appraisal Date	Land Value
12/31/2016	€	3,150,000
12/31/2017	€	2,750,000
12/31/2018	€	2,850,000

Required:

1. Prepare the journal entries at the end of 2016, 2017, and 2018 to record any changes in value to this land asset if IceCap chooses the IFRS cost model to value this property.
2. Prepare the journal entries at the end of 2016, 2017, and 2018 to record any changes in value to this land asset if IceCap chooses the IFRS revaluation model to value this property.

Answer 1

Cost Model

On 30th Jun 2016

	Debit	Credit
Land	3,000,000
Cash		3,000,000

Land is a non depreciable asset under IFRS. There will be no further entry in land account under cost model and it will remain at Eur 3m in balance sheet.

Revaluation Model

		Debit	Credit	Notes
30-Jun-16	Land	3,000,000
	Cash		3,000,000
31-Dec-16	Land	150,000		3,150,000 less 3,000,000
	Revaluation Gain (OCI)		150,000	Will be part of OCI and disclosed under equity in BS as Revaluation Surplus
31-Dec-17	Revaluation Surplus	150,000		Amount of revaluation loss to be offset with balance in Revaluation Surplus
	Revaluation Gain/Loss (P&L)	250,000		Balance revaluation loss to be charged to P&L
	Land		400,000	2,750,000 less 3,150,000
31-Dec-18	Land	100,000		2,850,000 less 2,750,000
	Revaluation Gain/Loss (P&L)		100,000	250,000 has been charged to P&L till last year, so any revaluation gain upto 250,000 will be charged to P&L, post which it will got to Revaluation Gain (OCI)