In relation to an asset revaluation surplus, an entity
A) is not able to use this surplus for the payment of future dividends;
B) is able to use this surplus for the payment of future dividends;
C) is not able to transfer this surplus to any other reserve account;
D) can transfer the surplus to current period profit or loss when the asset is disposed of.

Question

Quizplus · Accepted Answer

An entity is able to use an asset revaluation surplus for the payment of future dividends as it represents an increase in the value of assets, which can indirectly benefit the shareholders. However, the other options are not correct. The asset revaluation surplus cannot be transferred to any other reserve account (C) or be used to offset current losses (A). Moreover, the surplus cannot be transferred to current period profit or loss when the asset is disposed of (D) as it relates specifically to the revaluation of assets.

In Relation to an Asset Revaluation Surplus, an Entity