In: Accounting
How is the revaluation of an investment property treated differently from the revaluation of an item of property, plant and equipment?
Answer | |||||||||||
1 | The big difference is where there is a gain in the value of an asset | ||||||||||
2 | If it’s an investment property, that gain will go through profit or loss whereas if it’s a gain for a non-investment asset held under the valuation model the gain will be credited to a revaluation reserve. | ||||||||||
3 | Treatment of losses – investment property the loss goes to profit or loss | ||||||||||
4 | If it’s a non-investment property held under the valuation model the loss goes initially against earlier surpluses still in revaluation reserve and then any excess is expensed through profit or loss. | ||||||||||
5 | Depreciation is different. | ||||||||||
6 | Treatment of gains is different (as I have just pointed out). | ||||||||||
7 | Treatment of losses is also different (again, as I have just pointed out) | ||||||||||
8 | Different from revaluation model used for PPE. In revaluation model, if fair value is more than historical cost, no gain is reported in income statement. | ||||||||||
For investment property, the gain is recorded in the income statement and there is no revaluation surplus account. | |||||||||||