Choice "A" is correct. When the buildings were revalued in Year 1, the $200,000 revaluation gain was booked to other comprehensive income as a revaluation surplus. Under IFRS, if a revalued asset becomes impaired, the impairment is recorded by first reducing any revaluation surplus to zero, with further impairment losses reported on the income statement. In this problem, the buildings were impaired on December 31, Year 4 because the $2,295,000 carrying value of the buildings exceeded the $2,000,000 recoverable amount. The $295,000 ($2,000,000 - $2,295,000) impairment loss is recorded by first reducing to zero the $200,000 revaluation surplus from the Year 1 revaluation, and then recorded the $95,000 remaining impairment loss on the income statement.
Choice "b" is incorrect. An impairment loss must be recorded in Year 4 because the carrying value of the buildings exceeds the recoverable amount.
Choice "c" is incorrect. The $295,000 ($2,000,000 recoverable amount - $2,295,000 carrying value) impairment is recorded by first reducing the $200,000 revaluation surplus in equity to zero and then recording the remaining $95,000 impairment loss on the income statement.
Choice "d" is incorrect. When the $295,000 ($2,000,000 recoverable amount - $2,295,000 carrying value) impairment is recognized, $200,000 of the impairment will be recorded by reducing the $200,000 revaluation surplus in equity to zero and the remaining $95,000 impairment will be recorded on the income statement.