Fixed assets revaluation model

CFA Level I FRA
#1

Hi Everyone!

I have a question regarding revaluation model for fixed assets:

When we revaluate upward an asset, in order to decide what part of the revaluation value bypasses the I/S and will be recorded in the valuation surplus, do we take into account

  • the original cost (i.e. purchase cost) of the asset

  • or the current NBV (i.e. if it’s an older asset which we have already depreciated in previous years)?

For me logical is the 2nd but somehow the explanation is not clear for me.

Thanks in advance.

#2

if the asset has not been previously written down, any write up that puts it above the NBV goes into Revaluation surplus which is an equity account. If the asset is written down it is reflected in the I/S. A reversal that puts the asset back at its NBV is also reflected in the I/S, once again anything above NBV goes straight to the Revaluation Surplus account.

#3

Clear, thx.