MARU S.A. de C.V., a Mexican corporation that follows IFRS, has elected to use therevaluation model for its property, plant, and equipment. One of MARU’s machines waspurchased for 2,500,000 Mexican pesos (MXN) at the beginning of the fiscal year ended31 March 2010. As of 31 March 2010, the machine has a fair value of MXN 3,000,000.Should MARU show a profit for the revaluation of the machine?A. Yes.B. No, because this revaluation is recorded directly in equity.C. No, because value increases resulting from revaluation can never be recognized as aprofit.
MARU S.A. de C.V., a Mexican corporation that follows IFRS, has elected to use therevaluation model for its property, plant, and equipment. One of MARU’s machines waspurchased for 2,500,000 Mexican pesos (MXN) at the beginning of the fiscal year ended31 March 2010. As of 31 March 2010, the machine has a fair value of MXN 3,000,000.Should MARU show a profit for the revaluation of the machine?A. Yes.B. No, because this revaluation is recorded directly in equity.C. No, because value increases resulting from revaluation can never be recognized as aprofit.
Chapter14: Property Transactions: Capital Gains And Losses, § 1231, And Recapture Provisions
Section: Chapter Questions
Problem 75P
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Question
MARU S.A. de C.V., a Mexican corporation that follows IFRS, has elected to use the
revaluation model for its property, plant, and equipment. One of MARU’s machines was
purchased for 2,500,000 Mexican pesos (MXN) at the beginning of the fiscal year ended
31 March 2010. As of 31 March 2010, the machine has a fair value of MXN 3,000,000.
Should MARU show a profit for the revaluation of the machine?
A. Yes.
B. No, because this revaluation is recorded directly in equity.
C. No, because value increases resulting from revaluation can never be recognized as a
profit.
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