ASSET REVALUATION

Revalued amout will be credited to revaluation reserve.. and depreciation will be applicable on the new amount

arms length transaction means where any infuencing relation between parties does not exist.

When assets are revalued, the value of respective assets go up resulting in a notional or non monetary gain.


To give effect to this, we

DEBIT Asset account
CREDIT Revaluation Reserve account
(To the extent of increase in value)

Revaluation Reserve account is not a free reserve till the life time or discardation of the asset , whose revaluation portion lies in this account.

As far as depreciation is concerned,
In the books - depreciation will be provided on the revalued amount.

But Income Tax dept will not consider revaluation gain and depreciation on the revalued amount(ONLY on the revalued amount and not full amount) debited to P&L account will be disallowed.

And by the way, as per your question, land value will never depreciate, except in case of special circumstances.

Even in IT the depreciation can be only upto the cost of the assest for which it was purchased or altered. Depreciation on revalued portion of the asset value cannot be claimed in IT. Only for the books to show the current value of a particular asset one can revalue. But again all the accounting standards for the same applicable for giving proper notes on the accounting statement/