Revaluated retaine, retained earn,how to record? ?

Question

PPE,revaluated retaine, retained earn,how to record? how to post? and double entry?thanks

Answer 1

I presume you're using the Revaluation Model, i.e. The asset is carried at a revalued amount, being its fair value at the date of revaluation less subsequent depreciation, provided that fair value can be measured reliably. [IAS 16.31]

If a revaluation results in an increase in value, it should be credited to equity under the heading "revaluation surplus" unless it represents the reversal of a revaluation decrease of the same asset previously recognised as an expense, in which case it should be recognised as income. [IAS 16.39]

A decrease arising as a result of a revaluation should be recognised as an expense to the extent that it exceeds any amount previously credited to the revaluation surplus relating to the same asset. [IAS 16.40]

When a revalued asset is disposed of, any revaluation surplus may be transferred directly to retained earnings, or it may be left in equity under the heading revaluation surplus. The transfer to retained earnings should not be made through the income statement (that is, no "recycling" through profit or loss). [IAS 16.41]

Let's say you revalue an asset for the 1st time from $1m to $1.2m. You

Dr  Asset $200,000

Cr  Revaluation Surplus $200,000 (this is part of equity, you don't take this to Income statement)

The next time you revalue the asset to, say, $900k. You

Dr  Revaluation Surplus $200,000

Dr  Loss on revaluation $100,000 (income statement)

Cr  Asset $300,000