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I mean the different accounting treatment for revaluation surplus and revaluation decrease is like when revaluation upwards, it will not affect the profit. However, when revaluation downwards, it will reduce the profit. So, it sound like not fair to have this treatment. If continuing to practice this accounting treatment, what are the other problem that will happen eventually?
In accounting, there is a tendency to be prudent so the general principal is to recognise losses as they are anticipated but not recognise profits until they are achieved
The accounting treatment for provisions and contingencies illustrates that point well
If we apply this principle to revaluations, a deficit should be recognised as an expense as soon as it is foreseen (subject only to being set off against an earlier revaluation gain) whereas a revaluation increase is not certain to be achieved and so should not be recognised as a realised gain
Does that answer it for you?
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