Answer: Under IFRS, when a company operates in a high inflation environment, it is required to adjust its financial statements to reflect changes in the purchasing power of its local currency. In this case, since the local currency has lost significant purchasing power, Company A should make adjustments to its financial statements to reflect the change in the value of the land.

Under IFRS, the land should be restated to its current fair value using an appropriate inflation index. The gain from revaluation of the land should be recognized as income in the income statement, while the revaluation surplus should be recognized in the equity section of the balance sheet. The revaluation surplus represents the amount by which the fair value of the land exceeds its carrying amount.

The specific adjustments that Company A should make to its financial statements will depend on the local accounting and tax regulations in the country where it operates, as well as the guidance provided by IFRS.

Overall, the adjustments required under IFRS aim to provide more accurate and relevant financial information to users of the financial statements by reflecting the impact of inflation on the company's assets and liabilities.

Here's an example to illustrate the adjustments that Company A would need to make to its financial statements:

Assume that Company A operates in a country with an inflation rate of 10%. The company purchased a piece of land several years ago for 1 million local currency units. The current fair value of the land is 2 million local currency units. The company's financial statements prior to adjustment are as follows:

Balance Sheet:

Land (at historical cost) 1,000,000

Income Statement:

None

Step 1: Restate the land to its current fair value using an appropriate inflation index. The restated value of the land is calculated as follows:

Restated value of land = Historical cost of land x (Current price index / Price index at time of purchase)

Restated value of land = 1,000,000 x (1.1 / 1)

Restated value of land = 1,100,000 local currency units

Step 2: Recognize the gain from revaluation of the land as income in the income statement. The gain is calculated as follows:

Gain on revaluation of land = Restated value of land - Historical cost of land

Gain on revaluation of land = 1,100,000 - 1,000,000

Gain on revaluation of land = 100,000 local currency units

Income Statement:

Gain on revaluation of land 100,000

Step 3: Recognize the revaluation surplus in the equity section of the balance sheet. The revaluation surplus represents the amount by which the fair value of the land exceeds its carrying amount.

Balance Sheet:

Land (at restated value) 1,100,000

Revaluation surplus 100,000

Overall, the adjustments made to the financial statements reflect the impact of inflation on the company's land, providing users with more accurate and relevant financial information.

ALSO,

While revaluing the land to its current fair value of 2 million local currency units is correct, the revaluation gain should be recognized in the income statement rather than in other comprehensive income. Additionally, the deferred tax impact of the revaluation gain should be recognized in the income statement as well.

Under IFRS, a company is required to recognize a revaluation gain or loss in the income statement unless the gain or loss reverses a revaluation loss or gain recognized in a prior period. In this case, there is no prior revaluation loss or gain to reverse, so the revaluation gain of 1 million local currency units should be recognized in the income statement as follows:

Income statement:

Revaluation gain on land 1,000,000

Deferred tax expense 300,000 (assuming a tax rate of 30%)

The revaluation surplus of 1 million local currency units should also be recognized in the equity section of the balance sheet, as follows:

Balance sheet:

Land (at fair value) 2,000,000

Revaluation surplus 1,000,000

Overall, these adjustments provide users of the financial statements with more accurate information about the value of the company's assets and its financial performance.