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Introduction
This chapter contains the following sections (each section starts on a new page): In the year of revaluation The year following revaluation Assumed Knowledge This chapter assumes you are already familiar with the following: The accounting concepts governing fixed asset revaluations. Whether upward revaluation of fixed assets is permitted in your country.
If depreciation is charged on the revalued fixed asset Go to the Depreciation Adjustment cell (column AB). In the yellow cell enter the negative amount, which together with the cost adjustment, adjusts the net book value of the asset to the revalued amount (normally accumulated depreciation is completely reversed). Go to the Reason cell for the depreciation adjustment (column AC). Select 'Revaluation' from the drop down list. Two points to note regarding entering the depreciation adjustment: As it is a negative amount you have to enter, place the negative sign (-) before the amount. The program represents negative amounts in parenthesis e.g. -5,000.00 will appear as (5,000.00). It is recommended that you print the report 'Fixed Asset Depreciation Movements' to obtain the accumulated depreciation brought forward and depreciation charge in the year. This will ensure you do not accidentally enter a depreciation adjustment that is greater than the accumulated depreciation brought forward and depreciation charge in the year. To access this report click the button 'Depreciation Report'. Examples: Two examples are given below to illustrate the cost & depreciation adjustments you should make. Example 1 A property cost 250,000 with 55,000 accumulated depreciation giving a net book value of 195,000. If the property is revalued at 300,000, the cost & depreciation adjustments required to reflect the revaluation are as follows:
Rupert Parsons 2013 3
50,000 (55,000)
Example 2 A property cost 200,000 with 30,000 accumulated depreciation giving a net book value of 170,000. If the property is revalued at 190,000, there are two possible cost & depreciation adjustments to reflect the revaluation: Cost Adjustment: Depreciation Adjustment: or Cost Adjustment: Depreciation Adjustment: No adjustment (20,000) (10,000) (30,000)
(in the accounts 20,000 would be credited to a revaluation reserve) If the fixed asset is revalued prior to the year end: If a fixed asset is revalued during the year rather than at the end of the year, the depreciation adjustment will also need to reflect an additional depreciation charge due to the revaluation. Go to 'If depreciation is charged on the revalued fixed asset' on the following page for further details.
If depreciation is charged on the revalued fixed asset For this year and subsequent years over the remaining useful life of the asset: Enter the excess depreciation due to revaluation in the Depreciation Adjustment cell. The fixed asset program continues to calculate historical depreciation for the profit & loss account. The excess depreciation, entered in the Depreciation Adjustmentcell, should be charged to a revaluation reserve. To calculate the excess depreciation due to the revaluation: Use a separate copy of the fixed asset program to calculate the total depreciation charge on the revalued asset and deduct the historic depreciation charge registered in your actual fixed asset program. To calculate the total depreciation charge in the copy of the program: Go to the the fixed asset which has been revalued. In the Date cell (column C), enter the date of the revaluation. A warning message will appear when entering assets prior to the current accounting period. When the warning message appears, click 'Yes' to confirm the date. In the Cost / Value cell (column F), enter the revalued amount of the fixed asset. In the cell 'Year 1 Depreciation Months' (column M), enter the number of months of the new depreciation charge that was applied in year 1 (i.e. the previous year). This depends on when the revaluation occurred in the previous year. If the revaluation took place at the end of the financial year, enter 0 (months) and select 'No' in the cell 'Year 1 Depreciation Month of Purchase Included (Yes / No)?'.
In the Useful Life cell (column S), enter the estimated remaining useful life of the asset from the date of the revaluation. Go to the 'Depreciation charge in the accounting period' cell (column V) and confirm that the new depreciation charge for the asset has been calculated correctly.