What’s exactly the difference b/w those two in the context of NC Assets?
Revaluation is a method where you need to find out the fair value of Non - current tangible assets.
You can carry Non current assets either under Historical cost model or revaluation model.
If you carry under historical model your reported value(carrying value or CV) will be
Purchase cost - Accumulated depereciation.
Needless to say the above CV will not be reflective of actual market value of the asset.
Under revaluation model the company chooses to change the above carrying value to the fair value (market value) on a particular date. The new CV of the asset on date of revaluation would be the Fair value of the asset on date of revaluation.
However this does not mean that revaluation will be done on every subsequent balancesheet date. Post the revaluation the company may choose to carry the asset at
Revalued Value of the asset - Accumulated depereciation after the date of revaluation.
Thank you guys. So, in summary the revaluation model is like a “periodical update” of the HC, right?
What about revaluation above CV? As I’ve understood, revaluation above CV is limited on the balance sheet by previous downward revaluations, so in case the new revaluation is higher, the amount goes on the balance sheet (up to the limit) and the rest goes to the revaluation surplus. Is that right? Would all the amount go at the same time to the Income St?
Thanks!