Accounting Standard 10

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Nidhi Mehta (Querist)

04 February 2011 On revaluation of a fixed asset, revaluation reserve is created. AS-10 states that on disposal of this asset at a profit, difference between the net proceeds and net book value is transferred to P&L and the balance in the Revaluation reserve to General reserve.
Does the profit refer to difference between the revalued amount and the sale proceeds or the original amount(prior to revaluation). If you could kindly explain the accounting treatment alongwith an example and accounting entries for both profit and loss on disposal of the revalued fixed asset

CA Chandresh Agrawal

CA Chandresh Agrawal (Expert)

04 February 2011 Example:
There if fixed assets carrying WDV 100000 and u revised it at 150000 so u have to create 50000 reserve.

Now if u sold this asset at 90000 then in that case u will incure on paper loss of 60000 but this loss is due to revaluation also so first 50000 adjust with revaluation reserve and balance charge to profit and loss account.

if u sale this asset at 160000 then on paper gain is 10000 but in actual u have gained 60000 give effect of 60000 in profit and loss account

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