[Mrs 300]

OK, maybe I’m overstudying. But the answer Wiley gives is WRONG for this question. Please tell me if I’m wrong:

Veronica Corp. uses the revaluation model for intangible assets. On March 1, 2010, Veronica acquired intangible assets with an indefinite life for $200,000. On December 31, 2010, it was determined that the recoverable amount for these intangible assets was $180,000. On December 31, 2011, it was determined that the intangible assets had a recoverable amount of $187,000. How should Veronica recognize the gain or loss in the December 31, 2011 financial statements?

Answer is: Unrealized gain in other comprehensive income of $7,000.

I chose, Gain on the income statement of $7,000 because to the extent you reverse a previously recognized valuation loss, a gain should be reported on the income statement! I’m reading that right from Becker. Am I wrong or missing something?

REG - 80 (Becker only)
BEC - 76 (Becker only)
AUD - 71, 76 (Becker only)
FAR - 65, 74, 81! (Becker, Wiley Test Bank, Ninja notes & Audio)

CPA Class of 2012 🙂

[Anonymous]

I thought revaluation gains/losses only went to the income statement when you actually sold the item or is that for securities only?

[Mrs 300]

It says right here (in Becker) that if the revaluation gain reverses a previously recognized revaluation loss, they are reported on the income statement. You are right that what you're thinking relates to securities (they are on the i/s when they are sold or deemed permanently impaired).

REG - 80 (Becker only)
BEC - 76 (Becker only)
AUD - 71, 76 (Becker only)
FAR - 65, 74, 81! (Becker, Wiley Test Bank, Ninja notes & Audio)

CPA Class of 2012 🙂

[Anonymous]

I think it has to do with timing, the loss was recognized in 2010. It's 2011 so you have nothing to reverse on the I/S so it goes into OCI.

[Chantel]

In 2010 would that be a recognized loss or UNrecognized loss? I would say it's an unrecognized loss so Becker's explanation wouldn't apply. That's what I get from it anyways but I could be wrong.

F - F ('12), 90 (Dec '15)
A - F ('12), 73 (Feb '16), ? (July '16)
R - 87 (May '16)
B -

[Anonymous]

Scratch the last post, I just had a similar question in Becker and the extent to which the loss is reverse is first recognized in the I/S as gain, and then in OCI.

[Anonymous]

I think it's bc impairment losses for intangible assets cannot be reversed unless held for disposal. Question didn't say it was being disposed of. Therefore unrealized gain in OCI bc this will not hit IS

[momto5]

@ Mrs 300 – I think you are right. Becker lectures stated “Activity below cost goes to the Income Statement, activity above cost goes to OCI”. That gain is still below cost.

FAR - 92 (4/27/12)
AUD - 96 (7/17/12)
BEC - 92 (8/30/12)
REG - 91 (11/12/12)

[Author]

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