17 Revaluation
‘I think he revalued everything in his house according to the measure of response it drew from her well-loved eyes.’
F. Scott Fitzgerald (The Great Gatsby)
In a nutshell
Revaluations are carried out to reflect the current value of fixed assets included in a company’s balance sheet.
The effect of revaluing fixed assets is to increase (or decrease) their values, from their original purchase cost to market (fair) value.
The positive (or negative) difference is typically reflected as a gain (or loss) in a revaluation reserve. The gain is not profit, i.e. it is not reflected in the profit and loss account.
Land and buildings are most likely to be revalued by a business.
Need to know
A company can decide whether or not to revalue ...
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