deferred tax implications on disposal of revalued property?

Question

Assuming i revalue property worth $6,000 to $10,000 then dispose of it at $20,000, what accounting and deferred tax entries do i pass?

Answer 1

IAS 16.39 says "If an asset’s carrying amount is increased as a result of a revaluation, the increase shall be credited directly to equity under the heading of revaluation surplus." So when you revalued your property, you'd have:
Dr Property 4,000
Cr Revaluation surplus 4,000

after which the carrying amt of the property was $10k. Now you sell the property for $20k. IAS 16.67 says "The carrying amount of an item of property, plant and equipment shall be
derecognised:
(a) on disposal; or
(b) when no future economic benefits are expected from its use or disposal.
68. The gain or loss arising from the derecognition of an item of property, plant and equipment shall be included in profit or loss when the item is derecognised."
So upon derecognition, your entry would be:
Dr Cash (or A/cs receivable) 20,000
Cr Property 10,000
Cr Gain on disposal of property 10,000
(assuming no depreciation was charged since the revaluation)
The revaluation surplus in respect of this property is transferred directly to retained earnings on disposal or derecognition of the property (NOT taken through income statement). So:
Dr Revaluation surplus 4,000
Cr Retained earnings 4,000

Regarding deferred tax, you have to look into the components of your deferred tax liab. a/c and identify the amt which arose from this property in the past and take it out of deferred tax and bring it back into current income tax charge or reversal. At the end of the exercise, there shd be nothing relating to this property in the deferred tax liab. a/c. This is logical since the property is no longer there.