Intermediate Accounting - Revaluation
Intermediate Accounting - Revaluation
Intermediate Accounting - Revaluation
REVALUATION If an item is revalued, the entire class of assets to which that asset
belongs should be revalued. This is to avoid a mixture of costs and
Initially, an item of property, plant, and equipment that qualifies for revalued amounts within a class of property, plant and equipment.
r ecognition shall be measuredat cost.
The following are examples of separate classes:
fter recognition, an entity shall choose either the cost model or the
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revaluation model as an accountingpolicyandshallapplythatpolicyto a . Land e . Aircraft
b. Land & buildings f. Motor vehicles
an entire class of property, plant,andequipment.Undertherevaluation
c. Machinery g. Furnitures & fixtures
model, the PPE shall be measured at itsrevalued amount. d. Ships h. Office Equipment
evalued amount = fairvalueatthedateoftherevaluationless
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any subsequent accumulated depreciation and subsequent
accumulated impairment losses, i.e. BASIS OF REVALUATION
F air Value at Date of Revaluation The revalued amount of PPE is based on the following:
Less: (Subsequent Accumulated Depreciation)
a. F air Value - determined by appraisal normally undertaken by
Less: (Subsequent Accumulated Impairment Losses)
professional qualified valuers.
Revalued Amount
F airvalueisthepricethatwouldbereceivedtosellanassetinan
orderly transaction between market participants at the
nderIFRS,thereisnoclearcutruleonthefrequencyofrevaluation.The
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measurement date.
frequency of revaluation depends upon the changes in the fairvalueof
PPE being revalued, it may be: b. D
epreciated Replacement Cost or Sound Value - this shall be
used if the market value is not available.
A. A nnual revaluation (every year) for property, plant and
equipmentthatexperiencesignificantandvolatilechangesinfair It is the replacement cost orcurrentpurchasepriceoftheasset
value. minusthe corresponding accumulated depreciation.
B. E verythreeorfiveyearsforproperty,plantandequipmentwith epreciated Replacement Cost or Sound Value = Replacement
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only insignificant changes in fair value. Cost or Current Purchase Price less corresponding Accumulated
Depreciation
ACCOUNTING FOR REVALUATION Thedecrease of an asset carried at revalued amountshall be treated as:
hen an item of property, plant and equipment is revalued, any
W evaluation Surplus (1)
R x xx
accumulateddepreciationatthedateoftherevaluationistreatedinone Impairment Loss (2) xxx
Asset xxx
of the following ways :
( 1) Revaluation Decrease, to the extent of any credit balance
a. P roportional Approach — The accumulated depreciation is
existing in the revaluation surplus pertaining to that asset.
restated proportionately with the change in the gross carrying
amountoftheassetsothatthecarryingamountoftheassetafter (2) Any further decrease is charged toImpairmentLoss.
revaluation equals its revalued amount.
nincreaseofanassetcarriedatrevaluedamountwhichwaspreviously
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b. E limination Approach — The accumulated depreciation is impairedshall be treated as:
eliminatedagainstthegrosscarryingamountoftheassetandthe
net amount restated to the revalued amount of the asset. sset
A x xx
Gain on Reversal of Impairment (3) xxx
hen an asset's carrying amount is increased as a result of the
W Revaluation Surplus (4) xxx
revaluation, the increase shall be credited to Revaluation Surplus as a ( 1) Revaluation of Unrecovered Impairment Loss pertaining to
component of Other Comprehensive Income. that asset.
T herevaluationsurplusshallbetransferredtoretainedearningsinoneof (2) Any further increase is credited toRevelationSurplus.
the following ways:
sset is
A T he balance of evaluation surplus
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Depreciable revaluation surplus divided by remaining life
sset is
A T he balance of NONE
Non-Depreciable revaluation surplus