Long Term Asset
P1 revaluation model
The revaluation model is an alternative to the cost model for the periodic valuation and reporting of long-lived assets. IFRS permit the use of either the revaluation model or the cost model, while under GAAP; only the cost model is permitted.
Revaluation model changes the carrying amount to fair value. But the assumption is the fair value can be measured reliably.
P2 revaluation model& cost model
A key difference between the two models is that the cost model allows definitely decreases in the values of long-lived assets, but the revaluation model may result in increases in the values of long-lived assets.
IFRS allow a company to use the cost model for some classes of assets and the revaluation model for others, but the company must apply the same model to all assets within a particular class of assets and must revalue all items within a class to avoid selective revaluation.
P3 revelation model effect1
Let’s continue to talk about how an asset revaluation affects earnings. It depends on whether the revaluation initially increases or decreases an asset class’ carrying amount.
If a revaluation initially decreases the carrying amount of the asset class, the decrease is recognized in profit or loss. Later, if the carrying amount of the asset class increases, the increase is recognized in profit or loss to the extent that it reverses a revaluation decrease of the same asset class previously recognized in profit or loss. Any increase in excess of the reversal amount will not be recognized in the income statement but will be recorded directly to equity in a revaluation surplus account.
P4 revelation model effect2
If a revaluation initially increases the carrying amount of the asset class, the increase in the carrying amount of the asset class goes directly to equity under the heading of revaluation surplus. Any subsequent decrease in the asset’s value first decreases the revaluation surplus and then goes to income.
The revaluation model is an alternative to the cost model for the periodic valuation and reporting of long-lived assets. IFRS permit the use of either the revaluation model or the cost model, while under GAAP; only the cost model is permitted.
Revaluation model changes the carrying amount to fair value. But the assumption is the fair value can be measured reliably.
P2 revaluation model& cost model
A key difference between the two models is that the cost model allows definitely decreases in the values of long-lived assets, but the revaluation model may result in increases in the values of long-lived assets.
IFRS allow a company to use the cost model for some classes of assets and the revaluation model for others, but the company must apply the same model to all assets within a particular class of assets and must revalue all items within a class to avoid selective revaluation.
P3 revelation model effect1
Let’s continue to talk about how an asset revaluation affects earnings. It depends on whether the revaluation initially increases or decreases an asset class’ carrying amount.
If a revaluation initially decreases the carrying amount of the asset class, the decrease is recognized in profit or loss. Later, if the carrying amount of the asset class increases, the increase is recognized in profit or loss to the extent that it reverses a revaluation decrease of the same asset class previously recognized in profit or loss. Any increase in excess of the reversal amount will not be recognized in the income statement but will be recorded directly to equity in a revaluation surplus account.
P4 revelation model effect2
If a revaluation initially increases the carrying amount of the asset class, the increase in the carrying amount of the asset class goes directly to equity under the heading of revaluation surplus. Any subsequent decrease in the asset’s value first decreases the revaluation surplus and then goes to income.