Overview of Revaluing Assets
Use revaluation to record assets in your asset books at their fair value. You can revalue assets to increase or decrease their carrying value whenever there's a change in the fair market value of the asset.
Normally you perform revaluation of assets with enough regularity to ensure that the carrying amount doesn't differ materially from its fair value on the balance sheet date.
Revaluation differs from planned depreciation, in which the recorded decline in value of an asset is tied to its use in business activities and age.
Revaluation
After revaluation, assets are carried in the books at their fair value as of the date of the revaluation, minus any:
-
Later accumulated depreciation
-
Later accumulated impairment losses
When you revalue an asset, the Calculate Depreciation process calculates accumulated depreciation and accumulated impairment loss on the date of the revaluation, according to the revaluation method you select:
|
Revaluation Method |
Processing |
|---|---|
|
Cost |
The Calculate Depreciation process calculates the accumulated depreciation as the difference between the gross and the net carrying amounts. The process doesn't revalue the accumulated impairment loss and it remains unchanged. Note: You can revalue the gross and the net carrying amounts
either in the same proportion or a different proportion.
|
|
Net Book Value (NBV) |
Eliminates the accumulated depreciation and accumulated impairment loss against the gross carrying amount of the asset. |
Increase or Decrease in Carrying Cost
The revaluation results in either increasing or decreasing the carrying cost of an asset. Assets treats the increase or decrease as follows:
-
Increase: Charged to the profit or loss account to the extent that it reverses a previous revaluation decrease of the asset. The balance, if any, is credited to revaluation reserve.
-
Decrease: Debited to revaluation reserve to the extent of any credit balance existing in the revaluation reserve in respect to the asset. The balance, if any, is charged to the profit or loss account.