Definition of 'Revaluation'
Revaluation is important because it ensures that the financial statements are a true and fair representation of the company's assets and liabilities. It also helps to ensure that the company is not overstating or understating its profits or losses.
There are two main types of revaluation: upward revaluation and downward revaluation.
Upward revaluation occurs when the fair value of an asset has increased since it was originally recorded. This increase is recognized in the income statement as a revaluation gain.
Downward revaluation occurs when the fair value of an asset has decreased since it was originally recorded. This decrease is recognized in the income statement as a revaluation loss.
Revaluation is a complex topic, and there are many different rules and regulations that govern how it is performed. It is important to consult with a qualified accountant before making any revaluation decisions.
Here are some additional details about revaluation:
* Revaluation is typically performed on assets that are held for long-term use, such as property, plant, and equipment.
* Revaluation is not performed on assets that are held for trading purposes, such as inventory.
* Revaluation is not performed on liabilities.
* Revaluation is not required by GAAP or IFRS. However, it is permitted under both standards.
* Revaluation is often performed on a voluntary basis. However, it may be required by a company's lenders or other stakeholders.
Revaluation can have a significant impact on a company's financial statements. It can increase or decrease the company's assets and liabilities, and it can also affect its profits or losses. As a result, revaluation is a decision that should not be taken lightly.
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