Periodic Transfere of Revaluation Suplus to Retained Earnings

To understand this you need to understand realisation.
Assets are either realised by sale or use and therefore any related gains are also realised on sale or over use.
Unrealised gains go in OCI(reserves) and realised gains go into Ret.Earnings.
By sale:
Land is revalued upwards by $1m
Gain goes into Rev. Reserve(unrealised)
Land is subsequently sold
The $1m becomes realised and is moved from reserve(unrealised gains) to retained earnings(realised gains)

By use:
PPE is revalued upwards by $80m
Remaining life is 8 yrs.
Gain goes into Rev. Reserve(unrealised)
Since PPE will depreciate over 8 years,
the Rev. Reserve should decrease at the same rate.
That rate = 80/8= $10m per year.
So $10m will be released over 8 years to the Ret. Earnings
until the entire gain is realised.

Note that the revaluation reserve is indeed non-distributable when we recognise a surplus but over time
every asset will be realised and so will their gains.

Okay, to answer your specific questions:
1. IAS 16 para. 41 states that the entire revaluation
surplus may be transferred in full to retained earnings on disposal( realisation by sale)
or a portion released over the period of use (realisation by use).
So this is actually a policy choice, however most companies do the annual
transfer for PPE because they intend to use not sell it.
They still have to recognize the gain so they do this by setting
off the excess depreciation( see calc. above) through Ret. Earnings.

2. Since the company cannot distribute its revaluation reserve, and it
doesn’t intend to realize the full amount by sale, it releases an amount
into Ret Earnings which it CAN distribute and at the same time complies
with the accruals principle.
Quite frankly, as the IASB allows it, this is the method EVERY company
would choose, so it’s not really an option.

Hope this clears things up.