My understanding below (no garantee… plz correct me if I’m wrong):
“the value of your asset will fluctuate one period from another (using market value)”
“you report the loss on the income statement (and revaluations in shareholder’s equity)”
-Well… the initial writedown is recognized in the income statement.
(For revaluation): subsequent writeup is recognized in the income statement TO THE EXTENT OF the previous reported loss. Beyond that level, is called “revaluation surplus” and recognized in shareholder’s equity.
(See Scheweser Note Book #3 page 226 Question #7 for an example)
“is that going to be the equivalent of depreciation under the normal method?”
-Not equivalent. Regarding effect on Balance Sheet (asset valuation), just need to apply the updated estimate PROSPECTIVELY.
i.e. For current accounting cycle, update the carrying value of this asset (based on the revaluation). Depreciation will be affected accordingly (since the carrying value is changed).