Upward revaluation creates an unrealized gain in equity

Steps:

• Identify the event: Upward revaluation of premises increases asset value without sale.
• Recall accounting treatment: Under IAS 16, the surplus is credited to revaluation surplus in equity, not profit.
• Classify the gain: It remains unrealized until disposal, avoiding income statement recognition.
• Evaluate options: Match against standards to find the accurate statement.

Why A is correct:

• IAS 16 defines revaluation surplus as an unrealized gain, held in equity until realized through use or sale.

Why the others are wrong:

• B: Upward revaluation credits, not debits, the revaluation reserve.
• C: Unrealized gains bypass the income statement, going to other comprehensive income.
• D: Revaluation surplus cannot directly fund cash dividends; it requires transfer to retained earnings first.

Final answer: A