Revaluation Surplus.?

Under IAS 16:

the revaluation increase (surplus) is credited to Other Comprehensive Income (in Equity) "Revaluation Surplus account" and debiting the assets. 

Definition: A revaluation surplus is an equity account in which is stored any upward changes in the value of capital assets. If a revalued asset is subsequently dispositioned out of a business, any remaining revaluation surplus is credited to the retained earnings account of the entity.

This surplus is only used when an organization creates its financial statements in conformance with International Financial Reporting Standards. No revaluation surplus is allowed for a firm that uses Generally Accepted Accounting Principles.

 it can be main valuation equity account that is adjusted to a higher level, caused by an upward appraisal of capital assets and a resultant increase in the carrying value of such assets

Hello Dear 

Good day 

When fixed assets Depreciation equaled book value and decided to use it for many years in future

revaluation surplus it's for fixed assets only 

and when you make it . fixed assets must be calculated by fair value = market value

if market value greater than book value you can know now surplus . it accounts under Owner`s in balance sheet . 

Agree with the answer given

Under the revaluation model, revaluations are carried out regularly. All items of a given class are revalued. Revaluation increase are recognized in other comprehensive income and accumulated under heading of revaluation surplus. However, the increase shall be recognised in profit and loss to the extent that it reverses a revaluation decrease of the some asset previously recognised in profit or loss.

Fixed Assets are revalued to record in the books of accounts according to their market value.

These are revalued to Sell, to attract new investors & to plan for new investment by management.

In Balance sheet, surplus on revaluation is recorded after owner's equity.

Journal entry will be as under:

Asset                                     XXX

             Surplus on Revaluation              XXX

1)

Under IFRS, a company may increase the carrying value of its fixed assets (called “writing them up”) if the fair value of that class of assets is materially different from its carrying value. The increase in the value is recognized in Other Comprehensive Income and carried in the equity section of the balance sheet as a Revaluation Surplus.

2)

If the revaluation is the recovery of a previously recognized loss when the asset was impaired, the revaluation gain is reported on the income statement.

Thanks for invitation,

Will follow our specialized colleagues answers.

The Correct and Best Answer added by: frank mwansa   ACCOUNTING LECTURER 2 days ago