QUESTIONS 45 THROUGH 68 RELATE TO FINANCIAL STATEMENT ANALYSIS

64. A company, which prepares its financial statements according to IFRS, owns several investment

properties on which it earns rental income. It values the properties using the fair value model based

on prevailing rental markets. After two years of increases the market softened in 2012 and values

decreased. A summary of the properties’ valuations is as follows:



Original cost (acquired in 2010)

€50.0 million



Fair value valuation as at December 31, 2010

€50.5 million



Fair value valuation as at December 31, 2011

€54.5 million



Fair value valuation as at December 31, 2012

€48.0 million

Which of the following best describes the impact of the revaluation on the 2012 financial

statements?

A.

€6.5 million charge to net income

B.

€6.5 million charge to revaluation surplus

C.

€4.5 million charge to revaluation surplus and €2.0 million charge to net income