What are the four steps of a revaluation?

What are the four steps of a revaluation?

• A. Restate asset cost to the revalued amount; 2) Remove any existing accumulated depreciation; 3) Transfer the increase in the cost account and the existing accumulated depreciation to the revaluation surplus; 4) Recalculate the current year's depreciation on the revalued amount if applicable
• B. Remove existing accumulated depreciation; 2) Restate asset cost to the revalued amount; 3) Recalculate depreciation; 4) Transfer to revaluation surplus
• C. Restate asset cost; 2) Transfer to revaluation surplus; 3) Recalculate depreciation; 4) Remove accumulated depreciation
• D. Adjust asset cost to fair value; 2) Credit revaluation surplus; 3) Adjust accumulated depreciation; 4) Record impairment

Answer: (A)

When you revalue an asset, you update its carrying amount to the new fair value and then adjust depreciation going forward. The four steps reflect this process: first set the asset’s cost to the revalued amount; second remove the existing accumulated depreciation so the base reflects the revalued cost; third recognize the upward movement by transferring the increase to the revaluation surplus in equity (this includes combining the increase in the asset’s cost with the accumulated depreciation that’s being eliminated); and finally recalculate depreciation on the new carrying amount for future periods. This sequence ensures the asset is carried at the revalued amount, any gain is captured in equity rather than immediately in profit or loss, and depreciation reflects the new basis.

When you revalue an asset, you update its carrying amount to the new fair value and then adjust depreciation going forward. The four steps reflect this process: first set the asset’s cost to the revalued amount; second remove the existing accumulated depreciation so the base reflects the revalued cost; third recognize the upward movement by transferring the increase to the revaluation surplus in equity (this includes combining the increase in the asset’s cost with the accumulated depreciation that’s being eliminated); and finally recalculate depreciation on the new carrying amount for future periods. This sequence ensures the asset is carried at the revalued amount, any gain is captured in equity rather than immediately in profit or loss, and depreciation reflects the new basis.