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Asset Revaluation Guide

The document discusses guidelines for revaluing property, plant, and equipment. It outlines the revaluation model, basis of revaluation using fair value or depreciated replacement cost, accounting approaches, and required disclosures. Assets may be revalued annually if values fluctuate significantly or every 3-5 years if changes are minor. Revaluation surpluses are either allocated over remaining useful life or transferred to retained earnings upon sale.

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Alexander Dimalipos
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181 views2 pages

Asset Revaluation Guide

The document discusses guidelines for revaluing property, plant, and equipment. It outlines the revaluation model, basis of revaluation using fair value or depreciated replacement cost, accounting approaches, and required disclosures. Assets may be revalued annually if values fluctuate significantly or every 3-5 years if changes are minor. Revaluation surpluses are either allocated over remaining useful life or transferred to retained earnings upon sale.

Uploaded by

Alexander Dimalipos
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

REVALUATION MODEL

o The revalued amount is the fair value at the date of the revaluation less any
subsequent accumulated depreciation and subsequent accumulated
impairment losses.
o When property, plant and equipment are revalued, the entire class of
property, plant and equipment should be revalued
BASIS OF REVALUATION
 Fair value - The fair value is determined by appraisal normally undertaken by
professional qualified valuers.
 Depreciated replacement cost - Where market value is not available,
depreciated replacement cost shall be used.
The frequency of revaluation may be:

a) Annual revaluation for property, plant and equipment that experience significant
and volatile changes in fair value.
b) Every three or five years for property, plant and equipment with only insignificant
changes in fair value.

ACCOUNTING FOR REVALUATION


o Proportional approach - The accumulated depreciation at the date of
revaluation is restated proportionately with the change in the gross carrying
amount of the asset so that the carrying amount of the asset after revaluation
equals the revalued amount.

o Elimination approach - 'The accumulated depreciation is eliminated against


the gross carrying amount of the asset and the net amount restated to the
revalued amount of the asset.

REVALUATION SURPLUS
o allocated or realized over the remaining useful life of the asset and
reclassified through retained earnings.
o Difference of the revalued amount and book value recognized in other
comprehensive income rather than “profit or loss”
o Revaluation surplus that is transferred to retained earnings when the revalued asset is sold
regardless if it is depreciable or nondepreciable. If the asset is depreciable, the amount
transferred to RE is the difference between the depreciation on the revalued amount and
the depreciation on cost or simply the revaluation surplus balance divided by the remaining
life of the asset

Reversal -- A revaluation decrease shall be charged directly against any revaluation


surplus to the extent that the decrease is a reversal of a previous revaluation and the
balance is charged to expense.
Sale of revalued asset
o all accounts relating thereto shall be closed in order to determine properly the
gain or loss on the sale.
o The difference between the sale price and the carrying amount of the
revalued asset is recognized as gain or loss on the sale.
o
DISCLOSURES
a. The effective date of revaluation.
b. Whether an independent valuer was involved.
c. Method and significant assumptions applied in estimating fair value.
d. The extent to which the fair value was determined directly by reference to
observable prices in an active market or recent market transactions on an
arm's length terms or was estimated using other valuation technique.
e. Historical cost and carrying amount of each class of revalued property, plant
and equipment.
f. Revaluation surplus, indicating the movement for the period and any
restrictions on the distribution of the balance to shareholders.

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