Statement of Recognised Income and Expense

Sarah S

Hi. Expect this is quite simple really but our tutor doesn't like it much so we've only skimmed over it - what EXACTLY do we include? We've done a few Statements of Change in Equity but there doesn't seem to be a rationale given for the Recognised Inc/Exp.
Thank you!

peugeot

Whether your tutor likes or dislikes the subject should not be a prerequisite of whether he or she should teach it. S/he needs to follow the standards required for his/her students to pass their exams NOT because s/he does or does not like teaching the subject. This sort of approach to teaching leads me to believe some people are in the wrong job.

The Statement of Recognised Income and Expenses is a breakdown of the entries that make up the transfer to the statement of changes in equity.

For AAT exam purposes, I suspect the main item that would go into this would be a revaluation gain on a property.

What it does is strip out (and disclose) to the user of the accounts those items that have not been recognised in the profit and loss account.

As an example - if we have a property that has a cost of £100k and depreciation of £20k and in the year we have had this revalued. The surveyor says it's worth £200k then (£200 - £100) £100k will go into revaluation reserve (i.e. dr property £100k, credit revaluation reserve 100k). Similarly £20k will be debited from accumulated depreciation and credited to revaluation reserve (to reverse the original depreciation charged). So our revaluation reserve will contain a cr of £100K plus our reversal of £20k (£120k). This is a transfer to 'equity' as the Revaluation reserve is contained within the equity section of the balance sheet. A user simply looking at the income statement would not realise that a £120k transfer to equity had taken place. This prompted the standard setters to insist that a further breakdown be required being the Statement of Recognised Income and Expenses (SoRIE).

What the SoRIE does is 'breakdown' the entries that make up the total transfer within the year to equity at the foot of the profit and loss account/income statement.

Kind regards
steve