Revaluation Model: Carrying Amount vs. Depreciated Historical Cost

Hi all,

In my quest to understand FRA inside and out, I’m challenging myself to thoroughly investigate and understand every line in the CFAI text. However there’s one line I just came across that I’m not fully comprehending:

“Under the revaluation model, the relationship between carrying amount, accumulated depreciation, and depreciation expense will differ when the carrying amount differs significantly from the depreciated historical cost.”

Isn’t carrying amount the same thing as the depreciated historical cost?

as i understand, carrying amount is under cost method original, gross amount of the assets less accumulated depreciation. For example purchase was 100 two years ago, today acc.dep. is 20, carrying amount today is 80 (100-20).

Difference between historical depreciated cost and carrying value:

  1. Carrying Value of an asset is the value of an asset as per account records.

  2. Depreciated Cost = Original Cost – Depreciation – Amortization or Impairment Costs

Both will be the same when an asset is reported on the balance sheet without any revaluation. Usually an asset is reported on balance sheet using depreciated cost, which is its carrying value. Under the revaluation model, when an asset is revalued, the carrying value is the new ‘revalued value’.

Thanks Arif!

Thank you Arif and Carbolic!!

Ah, now it just clicked! This last line was especially helpful:

"Under the revaluation model, when an asset is revalued, the carrying value is the new ‘revalued value’. "

I think I can shed some more light on this standard if there’s anything else you need clarification on.

Under the revlaution method, assets are depreciated normally but are revalued to fair value less costs to sell in the event that the carrying amount of PPE becomes materially different from the net realisable value. Management assesses both for indicators of impairment as well as indications that the carrying amount may be meterially too low; and can make adjustments accordingly. When management posts an entry to revalue the asset, depreciation is recalculated based on the new depreciable amount relative to the remaining useful life


This is very helpful as well. Thanks a bunch, Seth!