[jeff]

Welcome to the Q1 2017 CPA Exam Study Group for FAR. 🙂

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[Anonymous]

If you wrote up the land to fair value in the debt restructure by 25K why wouldn't you include it in the income statement?

[j3cpa]

I didn't think land is subject to impairment or that we should recognize gain or loss on revaluation?

Study Material:
GLEIM
BEC - FEB/2012
AUD - FEB/2012
FAR - JULY/2012
REG - JULY/2012

[Stilgoin]

DR Note Payable 150,000
CR Land 75,000
CR Gain on Disposition of Land 25000
CR Gain on Restructure 50,000

???

B | 62, 78
A | 73, 67, 79
R | 82
F | 59, 59, Waiting

Ethics | 93

"Success is not final, failure is not fatal: it is the courage to continue that counts."
~Winston Churchill

“In a world full of critics, be an encourager."

[Anonymous]

@Stilgoin. I think that's correct. I think the wording in the problem is a little ambiguous

@j3cpa. I believe land is subject to impairment. You would only recognize a loss on revaluation under U.S. GAAP

[j3cpa]

@bondvilliAn

Yes u are right. Land is subject to impairment if the entity thinks there are regulations or other factors that might affect its FV.

Thanks.

How about this:

When land is revalued:

Land 25,000
Revaluation surplus 25,000

Note payable 150,000
Land 100,000
Gain 50,000

Study Material:
GLEIM
BEC - FEB/2012
AUD - FEB/2012
FAR - JULY/2012
REG - JULY/2012

[Stilgoin]

Revaluation Surplus is only allowed for IFRS. That is an OCI account and does not apply here. It is to recover impairment, but that is not allowed in US GAAP. To revalue the land to FV, it might be:

DR Land 25,000
CR Gain on transfer of asset 25,000

And then

DR Note Payable 150,000
CR Land 100,000
CR Gain on Restructure 50,000

But I feel combining them would present the situation better for interpretation.

DR Note Payable 150,000
CR Land 75,000
CR Gain on Disposition of Land 25000
CR Gain on Restructure 50,000

B | 62, 78
A | 73, 67, 79
R | 82
F | 59, 59, Waiting

Ethics | 93

"Success is not final, failure is not fatal: it is the courage to continue that counts."
~Winston Churchill

“In a world full of critics, be an encourager."

[j3cpa]

@stillgoin

U make me so hopeless bro.

How would an entity revalue land on GAAP? Ignore the current issues. If I think land value increased by 25k. How would I book that? If land is subject to the periodic revaluation…?

Study Material:
GLEIM
BEC - FEB/2012
AUD - FEB/2012
FAR - JULY/2012
REG - JULY/2012

[Anonymous]

GAAP does not allow you to write up the value of your assets unless they are trading securities or receivables in a foreign currency (that has appreciated in value). The land would remain at its carrying value even if its fair value has increased.

[mckan514w]

I would say that you have to recognize an impairment loss on the land and that netted together with the gain would give you a Net Gain of 50….

NP 150
Impairment loss Land 25
Land 100
Gain on Debt Restructure 75

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[j3cpa]

Thanks bondvillian. The more I read this post the more unprepared I feel.

I don't think land is impaired here. The FV exceeds carrying value. $10 land with carry value of $5 land. If anything it's a gain?

Study Material:
GLEIM
BEC - FEB/2012
AUD - FEB/2012
FAR - JULY/2012
REG - JULY/2012

[Stilgoin]

https://books.google.com/books?id=uV3KCQAAQBAJ&pg=PA447&dq=If+a+noncash+asset+is+given,+a+separate+gain+or+loss+is+recorded+to+revalue+the+noncash+asset+to+fair+value+(FV)+as+the+basis&hl=en&sa=X&ved=0ahUKEwj8jIX-26vRAhWDZiYKHSPwDRAQ6AEIKTAC#v=onepage&q=If%20a%20noncash%20asset%20is%20given%2C%20a%20separate%20gain%20or%20loss%20is%20recorded%20to%20revalue%20the%20noncash%20asset%20to%20fair%20value%20(FV)%20as%20the%20basis&f=false

“If a noncash asset is given, a separate gain or loss is recorded to revalue the noncash asset to fair value (FV) as the basis”

B | 62, 78
A | 73, 67, 79
R | 82
F | 59, 59, Waiting

Ethics | 93

"Success is not final, failure is not fatal: it is the courage to continue that counts."
~Winston Churchill

“In a world full of critics, be an encourager."

[mckan514w]

Thanks for posting @stillgoing! almost right ha ha ha 🙂

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[mtaylo24]

How is everybody progressing this week? Work has ruined all of my momentum from the holidays, but I hope to get back in the grove over the weekend. I have studied Deferred Taxes/AP over the past few days and will probably move onto another unit later today.

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[mckan514w]

Progress is slooooow Mtaylo! I got “killed” by the holidays as well and have had a hard time getting back into it- but have slowly gained momentum– when are you re-sitting?

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[mtaylo24]

McKan – I'm thinking either mid to late Feb. I am kind of superstitious about the extended window. IDK haven't even re-applied for a NTs yet. I have to fit in BEC also 🙁

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[Author]

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