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I have a doubt about the revaluation of Non-Tangible assets. When an asset is revalued (at the beginning of the year), the previous depreciation is closed out. When the asset is revalued Is the new depreciation is calculated from the year of purchase till the Useful life or from the Year of revaluation to the useful life?
In the case of intangible assets, these are generally carried at cost less amortisation if they are determined to have a finite life. They are also subject to test of impairment. In the case of intangibles of indefinite life these are held at cost and subject to tests of impairment on an annual basis.Only in very rare cases where their is an active market in the specific type of asset in question can they be held at fair value. Hope this helps. Feel free to ask if I haven’t adequately addressed your question.
My question specifically was regarding the Revaluation of Intangible Assets, when companies choose to apply revaluation to a class of Asset. The Company revalues the cost of the asset in sufficient regularity, my doubt was in one of the videos posted by open Tuition YouTube Channel. Where the Instructor after revealing the asset, only depreciates the asset for the revalued year. But, in one of my workbooks, after a revolution is made the depreciation is made from the year of purchase to the year of revaluation.
Ex:
Machine A : 10,000 CU
Purchased 20X0
No revolution till 20X2
Useful Life = 10 Years
Residual Value = 0Depricitaion till 20X2 = 10,000/10 = 1000 * 2 = 2000
= 10,000-2000
Carrying Value @ YE 20X2 = 8000@ YE 20X3 Revaluation was made as the fair value of the asset increased to 12000 CU.
Now @ YE 20X3 :
Is it A) Depreciation from the Year 20X3 after the revaluation: 12,000/8 = 1500
or Is it B) Depreciation from the Year 20X3 after the revaluation: 12,000/8*4 = 6,000 (4 is the year or uasge so far, from 20X0 till 20X3.As I indicated in previous response, depreciation does not apply to intangible assets. Only a very select class of intangibles are held at fair value- ones in which there is an active market. Since patents, copyright assets and similar are unique, they can’t be valued with reference to an active market. I believe fishing quotas and taxi licences are given as examples of assets on which an active market may exist in the standard IAS38 intangible assets.
If I were to answer your question with regard to tangible non-current assets then I believe the Opentuition way or option A version would be correct way of depreciating asset.Depreciate from time of revaluation at revalued amount, in a way that is in line with depreciation policy. Hope this helps. Feel free to ask if I haven’t adequately addressed your question.
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