REVALUATION

 Initially, property, plant and equipment shall be measured at

cost. After recognition, an entity shall choose either the cost
model or revaluation model.

 An item of property, plant and equipment shall be carried at

cost less any accumulated depreciation and any accumulated
impairment losses.

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 An item of property, plant and equipment whose fair value
can be measured reliably can be carried at a revalued
amount.

 The revalued amount is the fair value at the date of the

revaluation less any subsequent accumulated depreciation
and subsequent accumulated impairment losses.

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 Revaluations shall be made with sufficient regularity such
that the carrying amount does not differ materially from the
fair value at the end of the reporting period.

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 The revalued amount of property, plant and equipment is
based on the following:
 Fair value – the fair value is determined by appraisal
normally undertaken by professional qualified valuers.
 Depreciated replacement cost – where market value is
not available, depreciated replacement cost shall be
used.

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 Revalued amount – fair value or depreciated replacement
cost.
 Fair value – price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date
 Depreciated replacement cost (sound value)– replacement
cost minus corresponding accumulated depreciation

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 Replacement cost – current purchase price
 Carrying amount – historical cost minus corresponding
accumulated depreciation
 Revaluation surplus (revaluation increment) – fair value or
depreciated replacement cost minus the carrying amount.
 Appreciation or revaluation increase – excess of the revalued
amount over the historical cost.

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Illustration:
The following data pertain to a machinery on the date of revaluation:
Cost Replacement Cost
Machinery P3,500,000 P4,500,000
Accumulated Deprecation 1,200,000 2,000,000
Compute for
1. Carrying amount
2. Appreciation
3. Sound value
4. Revaluation surplus

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Illustration:
The following data pertain to a machinery on the date of revaluation:
Cost Replacement Cost
Machinery P8,000,000 P12,000,000
Accumulated Deprecation 2,000,000
The machinery was revalued 5 years from the date of acquisition.
Compute for
1. Original useful life of machinery
2. Carrying amount
3. Sound value
4. Appreciation
5. Revaluation surplus
6. Compute for new annual depreciation after revaluation
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 SEATWORK

Potchi Company provided the following data related to a machinery on

the date of revaluation:
Cost Replacement Cost
Machinery 9,000,000 15,000,000
Accumulated depreciation 3,600,000
Age of asset 10 years
1. Estimated useful life
2. Carrying amount
3. Appreciation
4. Depreciated replacement cost
5. Revaluation surplus

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Illustration: Change in useful life
An independent revaluation of a building by a professionally qualified
valuer shows the following details:
Cost Replacement Cost
Building P9,000,000 P15,000,000
Accumulated Deprecation 2,700,000
The original useful life of the building is 10 years but the revaluation
reveals a revised useful life of 15 years from the date of acquisition.
Compute for
1. Carrying amount
2. Appreciation
3. Sound value
4. Revaluation surplus
5. Compute for new annual depreciation after revaluation
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Illustration:
The following data pertain to a machinery on the date of revaluation:
Cost Replacement Cost
Machinery P8,000,000 P12,000,000
Accumulated Deprecation 1,200,000
The original useful life of the building is 20 years but the revaluation
reveals a revised useful life of 24 years from the date of acquisition.
Compute for
1. Age of machinery
2. Carrying amount
3. Sound value
4. Appreciation
5. Revaluation surplus
6. Compute for new annual depreciation after revaluation
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Illustration: Change in residual value and useful life
An independent revaluation of a building by a professionally qualified
valuer shows the following details:
Cost Replacement Cost
Machinery P8,500,000 P12,400,000
Residual value 500,000 400,000
Accumulated Deprecation 3,200,000
The original useful life of the building is 10 years but the revaluation
reveals a revised useful life of 12 years from the date of acquisition.
Compute for
1. Carrying amount
2. Appreciation
3. Sound value
4. Revaluation surplus
5. Compute for new annual depreciation after revaluation
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 Reversal of revaluation increase
When an asset’s carrying amount is decreased as a result of
revaluation, the decrease shall be recognized as an expense
(revaluation loss/ impairment loss).

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 Reversal of revaluation increase
However, a revaluation decrease shall be charged directly against
any revaluation surplus to the extent that the decrease is a reversal
of a previous revaluation and the balance is charged to expense.

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Illustration:
The land of Marvin Company had carrying amount of
P2,000,000 and sound value of P3,000,000 at the end of 2018.
However, at the end of 2019, the fair value of the land has fallen
to P2,500,000.

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Illustration:
The equipment of Marvin Company had carrying amount of
P2,500,000 and sound value of P3,000,000 at the end of 2018.
However, at the end of 2019, the fair value of the equipment has
fallen to P1,500,000, remaining useful life was 5 years.

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 Reversal of revaluation decrease
When an asset’s carrying amount is increased as a result of
revaluation, the increase shall be credited to revaluation surplus.

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 Reversal of revaluation decrease
However, a revaluation increase shall be recognized as income to
the extent that it reverses a revaluation decrease of the same asset
previously recognized as an expense.

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 Disclosures related to revaluation
(Read page 1349)

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