FAO Lincs - Revaluation Query

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in AAT member discussion
Hi Lincs,

I have seen your post re the Revaluation query. Sorry I didn't reply earlier but my laptop is in for repair and I am using another one which is absolute crap and your message disappeared after it crashed!

Basically, your assumption is correct that on disposal of the revalued asset, any amounts sitting in revaluation reserve are offset against reserves. The reason is that previous revaluations never went to the income statement as the asset hadn't been sold at the time of revaluation. When the asset is disposed of the profit/loss on disposal is recognised in the income statement but the revaluation surplus/deficit is carried across to general reserves rather than being recognised in the Income statement. When an asset is revalued the cost is uplifted (assuming it's a revaluation surplus), the accumulated depreciation is reversed as depreciation is then charged on the revalued amount and the resulting figure is put to the revaluation reserve, thus it never reaches the P&L.

Sorry about the long-winded approach in replying!

Kind regards
Steve

Comments

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:FAO Lincs - Revaluation Query

    Thanks Steve thats great, I understand what youre saying.

    The info out there though about the different revaluation methods is crap. Basically as I understand it depreciating assets goes one of two ways:

    1) Normal way: cost less depreciation

    2) Revaluation model: sparing all the details about how often and under what circumstances revaluations need to take place there are two ways to revalue:

    a) Market value - the cost of the fixed asset (or as we now say non-current tangible)is uplifted to the market value and credited to the revaluation reserve (or as we now say revaluation surplus, or so it seems). Accumulated depreciation is also reversed out and credited to the revaluation surplus.

    e.g. assets cost: 10,000
    acc dep 5,000

    then revalued to 20,000

    asset cost: 20,000
    acc dep 0
    rev surp 15,000

    or
    b) using the depreciated replacement cost, using this where no market value is available such as specialied machinery. In this method the depreciation is not zeroed but adjusted to what it would have been if the the asset had been purchased at the amount you have valued it at today. That is quite difficult to word right so e.g.:

    asset cost 10,000 expected to last 10 years
    acc dep 5,000 from 5 years straight line

    is then revalued to 20,000 but the five years expected life hasnt changed:

    asset cost 20,000
    acc dep 10,000

    (which can be shown in the accounts as either the cost as 10k with zero dep or cost 20k with 10k acc dep, either way the NBV, or carrying amount as we should now say, is 10k)

    the increased carrying value of 5k is credited to revaluation surplus.

    Now the explanation of all this pretty crap and the books seem to avoid going in to great detail as if they don't really know themselves.

    I would'nt expect you to know this much detail Steve off hand, but if you do maybe you could confirm or deny or check with the books/resources you have at your practice if your feeling particuarly inquisitive!

    PS: Im quite happy about the seperate nightmare of the adjustments in the income statement when a revaluation upwards/downwards where a previous revaluation has taken place on the same asset.
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:FAO Lincs - Revaluation Query

    Sorry bumping this to the top...

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