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Revaluation of Fixed Assets

Revaluation of Fixed Assets

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Published by Rupert Parsons
User guide for the fixed asset program (excel)
User guide for the fixed asset program (excel)

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Published by: Rupert Parsons on Apr 23, 2013
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Fixed Asset Program Manual

Revaluation of Fixed Assets
Fixed Asset Program Manual Copyright © 2013 Rupert Parsons This document is licensed under the Creative Commons Attribution Share Alike License version 3. You may copy, distribute and/or modify it under the conditions stipulated in the copyright licence. Click the link below to view the details of the copyright licence which applies to this publication: http://creativecommons.org/licenses/by-sa/3.0/deed.en

© Rupert Parsons 2013

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Introduction
This chapter contains the following sections (each section starts on a new page): • In the year of revaluation • The year following revaluation Assumed Knowledge This chapter assumes you are already familiar with the following: • The accounting concepts governing fixed asset revaluations. • Whether upward revaluation of fixed assets is permitted in your country.

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In the year of revaluation
Go to the Cost Adjustment cell (column Z) of the fixed asset which has been revalued. Enter the cost adjustment required to reflect the revaluation. Go to the Reason cell for the cost adjustment (column AA). Select 'Revaluation' from the drop down list. Example: A plot of land cost £150,000 and no depreciation was charged. If it is then revalued at £200,000, enter 50,000 in the Cost Adjustment cell to reflect the revaluation:

If depreciation is charged on the revalued fixed asset Go to the Depreciation Adjustment cell (column AB). In the yellow cell enter the negative amount, which together with the cost adjustment, adjusts the net book value of the asset to the revalued amount (normally accumulated depreciation is completely reversed). Go to the Reason cell for the depreciation adjustment (column AC). Select 'Revaluation' from the drop down list. Two points to note regarding entering the depreciation adjustment: • As it is a negative amount you have to enter, place the negative sign (“-”) before the amount. The program represents negative amounts in parenthesis e.g. -5,000.00 will appear as (5,000.00). • It is recommended that you print the report 'Fixed Asset Depreciation Movements' to obtain the accumulated depreciation brought forward and depreciation charge in the year. This will ensure you do not accidentally enter a depreciation adjustment that is greater than the accumulated depreciation brought forward and depreciation charge in the year. To access this report click the button 'Depreciation Report'. Examples: Two examples are given below to illustrate the cost & depreciation adjustments you should make. Example 1 A property cost £250,000 with £55,000 accumulated depreciation giving a net book value of £195,000. If the property is revalued at £300,000, the cost & depreciation adjustments required to reflect the revaluation are as follows:
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Cost Adjustment: Depreciation Adjustment:

50,000 (55,000)

(in the accounts £105,000 would be credited to a revaluation reserve)

Example 2 A property cost £200,000 with £30,000 accumulated depreciation giving a net book value of £170,000. If the property is revalued at £190,000, there are two possible cost & depreciation adjustments to reflect the revaluation: Cost Adjustment: Depreciation Adjustment: or Cost Adjustment: Depreciation Adjustment: No adjustment (20,000) (10,000) (30,000)

(in the accounts £20,000 would be credited to a revaluation reserve) If the fixed asset is revalued prior to the year end: If a fixed asset is revalued during the year rather than at the end of the year, the depreciation adjustment will also need to reflect an additional depreciation charge due to the revaluation. Go to 'If depreciation is charged on the revalued fixed asset' on the following page for further details.

© Rupert Parsons 2013

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The year following revaluation
In the following year (after you have run the year end procedure): Go to the entries made to the revalued asset in the previous year i.e. the Cost Adjustment & Reason cells (columns Z & AA) and if depreciation is charged, the Depreciation Adjustment & Reason cells (columns AB & AC). Delete all entries in these cells. if you do not delete the amount(s), the fixed asset will be revalued again!

If depreciation is charged on the revalued fixed asset For this year and subsequent years over the remaining useful life of the asset: Enter the excess depreciation due to revaluation in the Depreciation Adjustment cell. The fixed asset program continues to calculate historical depreciation for the profit & loss account. The excess depreciation, entered in the ´Depreciation Adjustment´cell, should be charged to a revaluation reserve. To calculate the excess depreciation due to the revaluation: Use a separate copy of the fixed asset program to calculate the total depreciation charge on the revalued asset and deduct the historic depreciation charge registered in your actual fixed asset program. To calculate the total depreciation charge in the copy of the program: Go to the the fixed asset which has been revalued. In the Date cell (column C), enter the date of the revaluation. A warning message will appear when entering assets prior to the current accounting period. When the warning message appears, click 'Yes' to confirm the date. In the Cost / Value cell (column F), enter the revalued amount of the fixed asset. In the cell 'Year 1 Depreciation Months' (column M), enter the number of months of the new depreciation charge that was applied in year 1 (i.e. the previous year). This depends on when the revaluation occurred in the previous year. If the revaluation took place at the end of the financial year, enter 0 (months) and select 'No' in the cell 'Year 1 Depreciation Month of Purchase Included (Yes / No)?'.

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In the Useful Life cell (column S), enter the estimated remaining useful life of the asset from the date of the revaluation. Go to the 'Depreciation charge in the accounting period' cell (column V) and confirm that the new depreciation charge for the asset has been calculated correctly.

© Rupert Parsons 2013

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