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What is the accounting treatment for the change in market value of fixed asset?

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Question ajoutée par Mobeen Tahir , Credit Officer , Tawuniya Insurance
Date de publication: 2016/04/03
Basharat Ali
par Basharat Ali , Accountant , Business Solution Professionals BSP Ltd

It depends if the entity is using Cost Model for the subsequent measurement of the asset or revaluation model. The choice is to be made by the accountant but if the cost model is used, then there is no effect of the increase in market value of the assets however if the MV of the asset decreases then it should tested for impairment as per IAS 36.

   In case company is using revaluation model, and the there is a significant increase in the MV of the asset, then the asset should be revalued upwards by passing the accounting entry:

   

2. Dr Acc. Depreciation

1.   Cr Revaluation Reserve

and if the entry is not balance then any difference, be it on debut side or credit side, shall be taken to asset cost account.

However if the value of the asset is decreased, then once again the asset shall be tested for impairment.

The asset should be revalued after a regular interval decided by the entity depending on how frequently the value of the asset changes in revaluation model