Disposal of a revalued asset (2024)

FAQs

Disposal of a revalued asset? ›

There are 2 steps to disposing of a revalued asset: a) It should be accounted for in the statement of profit or loss of the period in which the disposal occurs. b) The remainder of the revaluation surplus relating to this asset should now be transferred to retained earnings.

Depreciation of revalued assets

The asset must continue to be depreciated following the revaluation. However, now that the asset has been revalued the depreciable amount has changed. In simple terms the revalued amount should be depreciated over the asset's remaining useful life.

Where assets are measured using the revaluation model, any remaining balance in the revaluation reserve relating to the asset disposed of is transferred directly to retained earnings. No recycling of this balance into the income statement is permitted.

Selection of the most suitable method of revaluation is extremely important. The most used method is the appraisal method. Methods such as indexation and reference to current market prices are also used. However, when these methods are used they are crosschecked with the values arrived at by using the appraisal method.

An impairment loss is recognised immediately in profit or loss (or in comprehensive income if it is a revaluation decrease under IAS 16 or IAS 38). The carrying amount of the asset (or cash-generating unit) is reduced. In a cash-generating unit, goodwill is reduced first; then other assets are reduced pro rata.

In applying the revaluation model, adjustments are made to the PPE asset value by either adjusting the cost and accumulated depreciation proportionally, or by eliminating the accumulated depreciation and adjusting the asset cost to the new value.

The most straight forward transaction is where we receive money for the asset we are selling. The double entry is to debit the bank (as we are increasing the amount of money in the bank account), and then the other transaction must be a credit in the disposals account, as everything has to balance.

Under IFRS, a revaluation surplus (gain) is recorded to other comprehensive income (OCI), while a revaluation loss is recorded to the income statement.

A method of determining the depreciation charge on a fixed asset against profits for an accounting period. The asset to be depreciated is revalued each year; the fall in the value is the amount of depreciation to be written off the asset and charged against the profit and loss account for the period.

The revaluation surplus of fixed assets is reflected in the accounting records throughout the fixed asset's existence within the economic entity. At the exit of the fixed assets that were previously revaluated within the entity (regardless the cause: liquidation, sale, giving off for free, etc.)

Can you revalue a fully depreciated asset? ›

A fully depreciated asset cannot be revalued because the cost principle says that a company should record its assets and liabilities at the original cost. A fully depreciated asset's accumulated depreciation value is equal to its actual book value.

A revaluation journal entry is used to adjust the carrying value of a specific asset or group of assets to their current fair market values. This is typically done for assets that are subject to revaluation, such as property, plant, and equipment.

RULES & REGULATION FOR RE-EVALUATION OF ANSWER SCRIPTS

The request for re-evaluation by the student must be made within one month of declaration of his/her result of term-end examination. 3. After re-evaluation the better of the two scores of original marks/grade and marks/grade after re-evaluation will be considered.

The major difference between the two is that a revaluation can be made upwards (to increase the value of the asset to market value) or downwards (to ecrease the value). An impairment, on the other hand, only refers to one of the two; a fall in the market value which is then written down.

Loss of goodwill should never be reversed. But for other assets, the causes for impairment loss is resolved, it should be reversed in profit or loss.

An impairment loss is recognized through a journal entry that debits Loss on Impairment, debits the asset's Accumulated Depreciation and credits the Asset to reflect its new lower value.

26. Where the depreciable assets are revalued, the provision for depreciation should be based on the revalued amount and on the estimate of the remaining useful lives of such assets.

The asset is carried at cost less accumulated depreciation and impairment. [IAS 16.30] Revaluation model. The asset is carried at a revalued amount, being its fair value at the date of revaluation less subsequent depreciation and impairment, provided that fair value can be measured reliably.

The revaluation account is credited with increases in asset value and decreases in liability value. Since depreciation decreases the value of the asset, the revaluation account will be debited and the concerned asset account will be credited the amount of depreciation.

A fully depreciated asset cannot be revalued because the cost principle says that a company should record its assets and liabilities at the original cost. A fully depreciated asset's accumulated depreciation value is equal to its actual book value.