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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?
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 usage so far, from 20X0 till 20X3?Hi,
You need to be careful with the years given in the questions. In your example, is the revaluation taking place at the end of 20X2 or 20X3? You have calculated the CV at the end of 20X2 but then refer to a revaluation at the end of 20X3.
If you are calculating the CV at the end of 20X2 then I’d expect to see the revaluation take place on that date, as you would then compare the CV at this date to the fair value. If the revaluation is at the end of 20X3 then I’d expect to see the CV at the end of 20X3. If you elaborate further then I can help further.
Thanks
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