Revaluation of assets

[lassiecat]

Can anyone please explain the accounting treatment for revalued assets - assets which have been revalued at a higher cost (buildings)? And the effect this will have on depreciation as this will obviously now be a different value as a result of the revaluation.

 

[cheaper accountant]

The revaluation will impact the revaluation reserve on the balance sheet with the corresponding entry increasing the value of the building.

If the value has increased with no change to the useful life of the asset then the depreciation expense will increase.

 

[cheaper accountant]

If you subsequently revalue the building downwards (for whatever reason given by the valuer) you will reduce the revaluation reserve to the extent of previous increases and then any value over and above the revaluation reserve is expensed to the profit and loss.