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Revaluation Reserve

20 August 2007

An asset has been revalued and difference (increased) is transferred to revaluation reserve during the year 2005-06.

In the year 2006-07, the asset has been sold for profit.

Can any one answer the treatment for the amount credited to revaluation reserve in 2005-06 i.e., whether the same can be used for issue of bonus share. If the same can not be used for the said purpose, what will be the alternative use?

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10 Replies

Nitesh (Chartered Accountant) (340 Points)
Replied 20 August 2007

the amount of profit is w.r.t. to revalued value or orginal cost, if it is agt. revalued than you have to calculate the wdv considering orginal valyue and not revalued one. and you cant issue bonus out of revaluation reserve

vivek_bpl86 (CA Practice ) (92 Points)
Replied 21 August 2007

refer AS-10

bobby (Employee) (86 Points)
Replied 21 August 2007

hi, once the asset is sold then revaluation is to be trfd to Gen reserve, as per AS-10, hence it can be used for issue of bonus shares

(Guest)

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Ankit Dangayach (Chartered Accountant) (691 Points)
Replied 30 September 2007

Bonus shares cannot be issued from revaluation Reserve

Srinath A. N. (Officer - Legal) (283 Points)
Replied 18 October 2007

SEBI guidelines restricting issue of bonus shares out of revaluation reserve. However, Unlisted companies can issue bonus shares out of revaluation reserve since SEBI guidelines are not applicabale and the same has been upheld by the Supreme Court in - Appellants: Bhagwati Developers Vs. Respondent: Peerless General Finance and Investment Co. and Ors.

saran kumar (student) (145 Points)
Replied 31 October 2007

if comapny issued bonus shares in 05-06 is is not possible to issue from revaluation reserve account...... if comany issue bonus shares after sale of that respected asset then company is eligible to issue bonus shares fro that revaluation reserve account..... because after sale of asset revaluation reserve is automatically had the nature of free/general reserve

Srinath A. N. (Officer - Legal) (283 Points)
Replied 31 October 2007

In the referred decision, Supreme Court has not specified about sale of asset. The Hon'ble court upheld issue of bonus shares out of revaluation reserve.

amita (student) (0 Points)
Replied 29 April 2008

hey can anybody tell me what are the company law procedural guidelines for issue oof bonus shares of unlisted companies

Meekha (student) (169 Points)
Replied 02 June 2009

Can any one please tell me the full adjustments relating to revaluation reserve account and posting debit and credit side of such RR a/c in the books with examples?ie. for treatments like:1.when we are starting a new company and in the end of the year 1, we have revaluation profit. how is it treated what difference will it make when profit is made in the subsequent years? and also how is it treated when there is revaluation loss?(in both first and subsequent years) Please send me the reply to "souvin @ gmail.com"

Please help.