Answer: a $5 million loss on the income statement.

## Explanation Under the revaluation model (IFRS) for property, plant, and equipment: 1. **Initial revaluation (Year 1):** - Original cost: $12 million - Fair value at initial revaluation: $17 million - Revaluation surplus: $5 million ($17 - $12) - This $5 million gain is recognized in **other comprehensive income (OCI)** and accumulated in equity under revaluation surplus. 2. **Second revaluation (Year 2):** - Carrying value after initial revaluation: $17 million - Fair value at second revaluation: $12 million - Decrease in value: $5 million ($17 - $12) **Treatment of the $5 million decrease:** - First, the decrease is applied to **reverse any previous revaluation surplus** related to the same asset. - In this case, there was a $5 million revaluation surplus from Year 1. - The entire $5 million decrease can be offset against the $5 million revaluation surplus. - Therefore, the $5 million is recognized in **other comprehensive income** (to reverse the previous OCI gain), **not** on the income statement. **Key accounting principle:** - When a revaluation decrease occurs, it is first recognized in OCI to the extent of any previous revaluation surplus for that asset. - Only if the decrease exceeds the previous revaluation surplus would the excess be recognized as an expense on the income statement. **Conclusion:** The $5 million loss is recognized in other comprehensive income, not on the income statement. **Correct answer: B**

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