Depreciation on revalued assets

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Prakash (Querist)

17 September 2011 Dear Experts
Review this Thread and Let me know how to treat Depreciation on Revalued assets
To my Knowledge

AS per AS-6 " Depreciation Accounting"
The amount of Depreciation is Calculated on Historical Cost or the other amount in place of Historical Cost like Revalued Amount

So, the depreciation should be charged on the basis of revalued amount and the same will be debited to profit and loss account

But A disclosure should be made for effect of revaluation of fixed asset on the amount of depreciation in subsequent years

Here is thread
https://www.caclubindia.com/forum/details.asp?mod_id=167777&offset=1

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)

18 September 2011 In case of revaluation, the depreciation is calculated on the total revalued amount over a period of balance useful lives assessed on the date of revaluation. New cost for the purpose of depreciation will be gross cost less accumulated depreciation on the date of revaluation.
Along with this, the revaluation reserve is amortised to the income statement based on the useful life of the asset to which it relates. This is done to ensure that depreciation on the revalued amounts shouldn’t inflate/ deflate the income statement.
Example: On 1 Jan 2010 the gross cost of asset if 100 and accumulated depreciation is 20. On this date the asset cost is revalued by 50 with the remaining life of the asset to be 10 years. So the relevant cost for the purpose of calculating depreciation is 130(100-20+50).
Assuming a case of straight line depreciation, the depreciation charge will be 13 (130/10). In the same manner, the current year amortisation of revaluation reserve is 5 (50/10). Thus, the net impact on income statement is only 8 (13-5).
Hope that above will help you.

Prakash

Prakash (Querist)

18 September 2011 Sir
I have been searching the contents of Accounting Standards which says the treatment you did for Revaluation Reserve.

Does it mentioned in any Standard or it just an accounting policy to ensure that the depreciation on the revalued amounts should not inflate/ deflate the income statement

Prakash

Prakash (Querist)

22 September 2011 I closing my query

I confirmed that it just an accounting policy and not a mandatory treatment to follow

Prakash

Prakash (Querist)

22 September 2011 If wrong rectify

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