Which Statement Concerning Revaluations That Reverse Prior Adjustments in Value

question 3

Multiple Choice

Which statement concerning revaluations that reverse prior adjustments in value is untrue?

• A) A revaluation decrease that reverses a previous increase should be recognised as a decrease in other comprehensive income to the extent of any credit balance existing in the revaluation surplus reserve account.
• B) A revaluation increase that reverses a previous decrease should be recognised in the income statement to the extent that it reverses any previously downward revaluation of the same asset.
• C) When a change in valuation is a reversal of a previous revaluation, accumulated depreciation does not have to be written off against the asset before the revaluation is recorded.
• D) A debit to a revaluation surplus reserve account that is a reversal of a previous revaluation increase should not exceed the amount of the original credit.

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Definitions:

NPV

Net Present Value, a calculation to determine the present value of future cash flows minus initial investment, used to assess the profitability of a project.

Market Efficiency

An economic theory that posits that it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information.

Security Prices

The current market price or value of a financial security, such as stocks and bonds, determined by supply and demand.

Excess Returns

The return on an investment that exceeds the benchmark or risk-free return, reflecting the additional risk taken by the investor.