Transfers from Revaluation Surplus to Retained Earnings

CFA Level I FRA
#1

I’m a little confused with the transfers from the revaluation surplus account to retained earnings.

When there is an upward revaluation of a fixed asset, the difference between the carrying amount and the revalued asset, will go directly to the revaluation surplus in equity.

Now, in subsequent periods, why the revaluation surplus is going to be reduced? In the textbooks it says:

"An amount equal to the additional depreciation from the upward revaluation of the asset, less the tax liability on that portion of the revaluation (why do we subtract this?), is transferred from revaluation surplus to retained earnings"

Can someone please explain the book entries or is there any example where can I understand this? I haven’t found one.

Thanks in advance!

#2

It goes as a loss.

#3

snfuenza, did you ever get this figured out? I would like to know the answer as well.

#4

Sorry, yes.

As you use the asset, the additional depreciation would decrease the revaluation surplus and would go to Retained Earnings as a loss for every period. Imagine like it is a mini asset but separated from the rest.

Correct me if I’m wrong.