What are the main benefits of asset revaluation & impairment?

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Assets Re-evaluation and impairment Shows the Real Value of Assets

it is already the more Reliable Value than Historical Cost 

When Selling or Buying new Entities or Firms they Use Fair or Market value    

Benefits of Assets evaluation are:

·         To show the true rate of return on capital employed.

·         To conserve adequate funds in the business for replacement of fixed assets at the end of their useful lives. Provision for depreciation based on historic cost will show inflated profits and lead to payment of excessive dividends.

·         To show the fair market value of assets which have considerably appreciated since their purchase such as land and buildings.

·         To negotiate fair price for the assets of the company before merger with or acquisition by another company.

·         To enable proper internal reconstruction, and external reconstruction.

·         To issue shares to existing shareholders (rights issue or follow-on offering).

·         To get fair market value of assets, in case of sale and leaseback transaction.

·         When the company intends to take a loan from banks/financial institutions by mortgaging its fixed assets. Proper revaluation of assets would enable the company to get a higher amount of loan.

·         Sale of an individual asset or group of assets.

·         In financial firms revaluation reserves are required for regulatory reasons. They are included when calculating a firm's funds to give a fairer view of resources. Only a portion of the firm's total funds (usually about 20%) can be loaned or in the hands of any one counterparty at any one time (large exposures restrictions).

·         To decrease the leverage ratio (the ratio of debt to equity).

Asset Revaluation.

Todays a World - A Global Village - A  Binocular Area 

Every thing based on Market Value- in few hours Market Value Ups & Downs.

Every business based on its Market Worth.

A Company Worth on its Asset against Liabilities & Equity.

I agree with Professor / mohamed Hakim

Many Thanks for invitation

Benefits of Revaluation:

1. Tax Benefit : Revaluation of Assets result in an increase in value of asset hence amount of depreciation will increase and thereby resulting in Income Tax Deduction
2. Balance Sheet : Although fixed asset revaluation doesn’t give direct impact on cash flow, we are still can get benefit from fixed asset revaluation. Uncertainty economic condition and slowing in economic growth, make profit in some entities decrease. Through fixed asset revaluation, entity has chance to increase fixed asset value, so that entity can improve their leverage.
3. Use it as collateral for a loan: Appreciated asset may be used for mortgage for getting loan of higher amount

Benefits of impairment

1. Profit Increase: With reduction in value of asset the deprecation cost will reduce hence more profitability.
2. True and Fair view: It will show the correct fair value of assets rather than inflated value.
3. Economy in insurance cost: with proper impairment there will be reduction in insurance cost.