ACX2100 Chap.5 Revaluation of Property, Plant and Equipment
Revaluation of Property, Plant and Equipment
AASB 116 recognises property, plant and equipment when future benefits are probable and cost can be measured reliably. Initial cost contains purchase price after discounts, directly attributable expenditure that brings the asset to the location and condition necessary for intended use, and the initial estimate of dismantling or restoration obligations.
Training, advertising, opening losses and general administration are normally expensed. After recognition, choose the cost or revaluation model for an entire class; the whole-class rule prevents cherry-picking appreciated assets. Revaluations occur with sufficient regularity rather than on a universal fixed interval.
A first increase normally goes to other comprehensive income and revaluation surplus; a first decrease normally goes to profit or loss. A later increase first reverses a prior profit-or-loss decrease for the same asset, then sends any residual to OCI. A later decrease first uses the same asset’s surplus through OCI, then charges the excess to profit or loss.
Accumulated depreciation can be eliminated against gross carrying amount before revaluation, and future depreciation uses the new carrying amount. Airservices Australia’s public 2023–24 policy note provides real-world corroboration of the measurement and disclosure structure.
What this chapter covers
- 01
PPE definition and recognition
- 02
Purchase price, directly attributable cost and restoration obligation
- 03
Costs excluded after ready-for-use point
- 04
Cost model versus revaluation model
- 05
Class-wide policy and no cherry-picking
- 06
Sufficient regularity
- 07
First increase and first decrease directions
- 08
Subsequent reversal of opposite history
- 09
Accumulated-depreciation elimination
- 10
Depreciation after revaluation
- 11
Reading a public annual-report policy note
AskSia-authored practice — track a land revaluation through both performance statements
- First fallThe first $30,000 decrease has no prior surplus, so recognise it in profit or loss.
- ReverseThe later increase from $470,000 to $560,000 is $90,000. Recognise $30,000 in profit or loss to reverse the earlier loss.
- SurplusRecognise the residual $60,000 increase in OCI and accumulate it in revaluation surplus.
- Later fallThe decrease from $560,000 to $520,000 is $40,000. Use the existing $60,000 asset-specific surplus through OCI.
- ProofClosing surplus is $20,000 and land carrying amount is $520,000. No amount from the last decrease reaches profit or loss.
Key terms
- Directly attributable cost
- Incremental cost necessary to bring an asset to the location and condition required for intended operation.
- Class of PPE
- Grouping of assets similar in nature and use, to which one measurement policy is applied.
- Revaluation surplus
- Equity accumulation of qualifying revaluation increases recognised through OCI.
- Sufficient regularity
- Frequency needed to keep carrying amount from differing materially from fair value; not one fixed timetable.
- Elimination method
- Removing accumulated depreciation against gross carrying amount before restating the net asset to fair value.
Revaluation of Property, Plant and Equipment FAQ
Can an entity revalue only assets that increased?
No. The revaluation model is applied to an entire class to avoid selective measurement.
Where does a first revaluation increase go?
Normally to OCI and revaluation surplus. A portion reversing a prior profit-or-loss decrease for the same asset goes to profit or loss first.
Where does a revaluation decrease go?
Normally profit or loss, except that an existing surplus for the same asset is used through OCI first.
How often must assets be revalued?
With enough regularity that carrying amount remains materially close to fair value. Volatility determines frequency; there is no universal interval.
Exam move
Build one three-component initial-cost problem and one excluded-cost list from memory. For revaluation, draw a time line for a single asset and update two balances after every date: profit-or-loss loss available to reverse and revaluation surplus available to absorb a fall. Do not net different assets. Add an accumulated-depreciation elimination and calculate the new annual depreciation.
Use the Airservices policy as a reading exercise: identify classes, frequency, accumulated-depreciation treatment, recognition route and valuation judgement. Week 4 prescribed reading is Chapter 6. Practise revaluation as asset-specific history, not a global rule card.
Before each movement, write the existing surplus and any earlier profit-or-loss decrease for that asset; then route only the amount needed to reverse that history before using the normal destination. Reconcile gross cost, accumulated depreciation and net carrying amount after an elimination entry.
On the next line, calculate depreciation from the revalued amount, residual value and remaining life so the prospective effect is visible. Change the second valuation in a completed timeline and predict the OCI and profit-or-loss split before computing. End with a whole-class policy question to distinguish measurement consistency from the journal treatment of an individual asset.
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