 Hello and welcome to this session. This is Professor Farhad. In this session, I'm going to look at an IFRS revaluation model in the form of a CPA question to illustrate this concept. As always, connect with me on LinkedIn. If you haven't done so, YouTube is where you would need to subscribe. I have 1,600 plus Accounting, Auditing, Finance, and Text Lectures. This is a list of all my courses, including many, many CPA questions. If you like my lectures, please like them, share them, subscribe to the channel, connect with me on Instagram. And on my website, I have plenty of resources for the CPA exam. 2,000 plus CPA questions, plus hundreds, if not close to over a thousand, multiple choice and true-false practice questions. So I strongly suggest you check out my website. So the question is about revaluation model under IFRS, but it also covered the fair value adjustment. So it's very important to understand this concept. So the company has a parcel of land to be used in the future production facility. That's fine. The company applies the revaluation model under IFRS, the Disclass of Asset, that's important. In year one, the company acquired the land of $400,000. So we have a cost of $100,000. This is the cost of the land. In year one, the carrying value is reduced to $90,000, which represents the fair value at that date. So in year one, the company lowered the lower the lower the value to $90,000. This is the end of year one because the value was $90,000. In other words, they took a $10,000 losses. It's to be more specific, unrealized losses. At the end of the year two, the land revalued and the fair value increased to $105,000. So in year two, they went from $90,000 up to $105,000, and this is at the end of year two. So in year two, they moved together, they moved $15,000. How should the company account for year two change in fair value? So the question is, how should the company account for year two change? Well, it's very important to understand how we deal with year one as well as with year two. What do I mean by this? You guys remember, the first thing I looked at is the cost, and the cost is $100,000. And here's what's going to happen. Every time, every time you are adjusting the fair value in this area, this is below cost. All changes go into the P&L or the income statement. Anytime you are adjusting the fair value in this area, what's special about this area? This is above the cost. Any changes goes into goes on the balance sheet, goes on the balance sheet goes into equity, specifically comprehensive income. So let's take a look at the answers. Answer one, recognize 15,000 and other comprehensive income. Is that true? Not really. Remember, part of the change, if you remember, part of the change was in this area below. So it cannot be all in comprehensive income because part of the change was below 100,000. Recognize 15,000 and profit and loss. No, some of the change was above the cost. Well, guess what? You guess the answer. We're going to get 10,000 and profit and loss. So this area here, remember, we moved up, we moved from 90 up to 105. So the line was right here. The cost was right here. This is 100. So what's going to happen? 10,000, 10K will go into the P&L and 5K will go into OCI, other comprehensive income or comprehensive income. So this is what we do with that change. Some of it is in P&L, some of it in OCI. Now let's go to year three. It's very important we understand what's going to happen in year three. In year three, we are standing at 105. In year three, we are standing right here. If we move more to 107 or above or whatever, if we move more than 105 or we stay above 100,000, let's assume we move down to 102. As long as we are above the 100,000, all the changes goes into OCI. If we move back to below the cost, below 100,000, some of it will be in OCI, some of it will be in P&L. Simply put, let me draw the cost one more time here. This is your line cost. Any changes above the cost goes into OCI. Any changes below the cost goes into the P&L. In this situation, we went from the P&L, the change affected both areas, affected the profit and loss as well as the other comprehensive income because it was above the line. So I hope this is, I believe, once you understand this, once you remember this, this is an easy CPA question which is, and they do ask about this revaluation model under IFRS. Study hard. Again, I would like to remind you on my website I have thousands of CPA questions. One subscription gives you access to all. Stay safe, study hard, and good luck.