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Chapter 2

3.2 Accounting for revaluation

 Restate asset cost to new value (increase = debit asset cost)

 Remove accumulated depreciation (debit asset accumulated depreciation)

 Revaluation gains are credited to revaluation surplus via other comprehensive
income (credit revaluation surplus)

 Revaluation losses are charged as an expense (debit statement of profit or loss)

Note that if a revaluation reverses a previous gain or loss then the previous gain
or loss is reversed before following the above rules.

3.3 Impact of revaluation

 All assets in same class to be revalued

 Once revalued, revaluations must be kept up to date

 Subsequent depreciation will be based on the new value and remaining useful
economic life

3.4 Annual reserves transfer

IAS 16 permits an annual transfer to be made from the revaluation surplus to
retained earnings to offset the additional depreciation charged as a result of the
revaluation. This transfer would be shown on the statement of changes in equity
(see chapter 1).

Where the asset life remains unchanged the calculation of this transfer is simply the
difference between the new and previous depreciation charge. If the asset life
changes the transfer is the revaluation surplus relating to depreciated assets divided
by the remaining asset life.

3.5 Disposal of revalued asset

There are two steps to disposing of a revalued asset:

 Calculate gain on disposal by comparing sale proceeds to carrying amount

 Transfer balance on revaluation surplus to retained earnings (debit revaluation
surplus, credit retained earnings), again shown on the face of the statement of
changes in equity.

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