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Homework answers / question archive / Lawland Co
Lawland Co. owns 100 percent of the common shares of Minerva Co., a British company with a manufacturing plant in Oxford, England. Using IFRSs, British companies are allowed to revalue their fixed assets to current values with the revaluation adjustment recorded in a reserve account in shareholders' equity. Depreciation expense is based on the current values of any revalued assets. The revaluation adjustment is transferred from the reserve account directly to retained earnings over the life of the revalued asset. At the end of Year 7, an appraisal of Minerva's manufacturing plant indicated that the current value was £500,000 greater than its net book value and indicated an estimated remaining life of 10 years. If Minerva revalues its manufacturing plant, what impact will this revaluation have on its debt-to-equity ratio on the date of the revaluation? Multiple Choice It will decrease. U O It will increase. O It will not change. It cannot be determined.
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