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Revaluation Accountutorial

The document outlines the revaluation model for property, plant, and equipment (PPE), detailing how assets are carried at their revalued amount based on fair value or depreciated replacement cost. It discusses the frequency of revaluation, methods for accounting for revaluation surpluses, and subsequent accounting practices for revaluation increases and decreases. Additionally, it explains the presentation of revaluation surplus in financial statements.

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ampatuanregine2005
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3 views10 pages

Revaluation Accountutorial

The document outlines the revaluation model for property, plant, and equipment (PPE), detailing how assets are carried at their revalued amount based on fair value or depreciated replacement cost. It discusses the frequency of revaluation, methods for accounting for revaluation surpluses, and subsequent accounting practices for revaluation increases and decreases. Additionally, it explains the presentation of revaluation surplus in financial statements.

Uploaded by

ampatuanregine2005
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

REVALUATION

JPIA-NDU
REVALUATION MODEL
Under revaluation model, property, plant, and
equipment are carried at revalued amount.

FV at the date of revaluation - Any subsequent


accumulated depreciation - subsequent
accumulated impairment loss
BASIC CONCEPTS
FREQUENCY OF APPLICATION OF
REVALUATION REVALUATION

Depends upon the


Entire class of PPE; To
movement in the FV of the
avoid selective revaluation
items in the PPE
Simultaneous revaluation is
Significant and volatile
not applicable
(annual moment
*Rolling basis; provided completed
Significant and involatile (3
within short period of time
to 5 years movement)
BASIS OF REVALUATION
The REVALUED AMOUNT of an item of property, plant, and equipment is
based on the following:

a) FAIR VALUE - The fair value is determined by appraisal normally


undertaken by professional qualified values
b) DEPRECIATED REPLACEMENT COST or SOUND VALUE - Where fair
value is not available, depreciated replacement cost shall be used.
ACCOUNTING FOR
REVALUATION

Original Cost xx Replacement Cost xx


Accumulated Depreciation xx Accumulated Depreciation xx
Carrying Amount xx Revalued Amount xx

NOTE: The difference between the carrying amount and revalued


amount is known as revaluation surplus and should be net of applicable
tax.
ACCOUNTING FOR
REVALUATION
On initial recognition, revaluation surplus should be accounted for using:

a) PROPORTIONAL METHOD - 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.
b) ELIMINATION METHOD - 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.
SUBSEQUENT
ACCOUNTING
a. TRANSFER TO RETAINED EARNINGS

LUMP-SUMP PIECEMEAL
TRANSFER TRANSFER

Depreciable Amount ✓ ✓
Non-depreciable PPE ✓ ✗

NOTE: Lump-sum transfer is direct transfer to retained earnings upon


derecognition of PPE. Piecemeal transfer is a portion transfer to retained
earnings upon computation of depreciation.
SUBSEQUENT
ACCOUNTING
b) REVALUATION DECREASES c) REVALUATION INCREASES

✓ Charged to revaluation surplus ✓ Impairment Loss


✓ Impairment Loss ✓ Charged to revaluation surplus
PRESENTATION OF
REVALUATION SURPLUS
✓ Statement of Comprehensive Income, part of OTHER
COMPREHENSIVE INCOME, net of tax

✓ Statement of Financial Position, the CUMULATIVE


BALANCE is presented within SHAREHOLDERS’
EQUITY, net of tax
THANK YOU!

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