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
The balance sheet typically records fixed assets at their purchase (historic) cost. A business is permitted, under accounting rules, to record fixed assets at their market value. The business can further choose which types (classes) of fixed asset to revalue (e.g. land and buildings, plant and machinery). However, once a company decides to revalue one or more classes of assets, valuations must be kept up to date.
The effect of revaluing is to increase (or decrease) fixed asset values from their original purchase cost. The higher (or lower) value is recorded ...
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