Revaluation Method of Depreciation:

Learning Objectives:

1. Define and explain the revaluation method of depreciation.

2. When and where this method is used?

As the name implies under revaluation method, the assets are valued at the end of each period so that the difference between the old value and the new value, which represents the actual depreciation can be charged against the profit and loss account. This method is mostly used in case of assets like bottles, horses, packages, loose tools, casks etc. On rare occasions when on revaluation the value of an asset is found to have increased, it being of temporary nature not taken into account.

Revaluation method is open to various objections.

Firstly, the method do not specify as to which is the value that the experts are to estimate at the end of each year. It however appears that this is the market value. If so, to assess depreciation with reference to market value is against the basic principles and theory of depreciation. A fixed asset has nothing to do with market value.

Secondly, the charge against profit and loss account on account of depreciation will vary year to year through the asset renders the same service throughout of its life time.

Thirdly, this method is unscientific, because there are great chance of manipulations.

You may also be interested in other articles from “accounting for depreciation” chapter:

1. Definition and Explanation of Depreciation
2. Causes of Depreciation
3. Need for Depreciation
4. Depreciation, Depletion and Amortization
5. Difference Between Depreciation and Fluctuation
6. Basic Factors of Determination of Depreciation
7. Depreciation Methods / Methods for Providing Depreciation
8. Fixed Installment Method / Straight Line Method / Original Cost Method
9. Diminishing balance/written Down Value/Reducing Installment Method of Depreciation
10. Annuity Method of Depreciation
11. Depreciation Fund Method or Sinking Fund Method
12. Insurance Policy Method of Depreciation
13. Revaluation Method of Depreciation
14. Sum of the Years’ Digits Method of Depreciation
15. Double Declining Balance Method of Depreciation
16. Depletion Method of Depreciation
17. Basis of Use System of Depreciation
18. Depreciation Of Various Assets
19. Depreciation Accounting – General Questions and Answers

Other Related Accounting Articles:

• Definition, Explanation and Characteristics of “Depreciation” or “Accounting Depreciation
• What is Depreciation?
• Written Down Value
• Appraisal Capital Explained
• Book Value Explained
• Depreciation: Straight Line Biases
• Accounting for Capital Lease
• Correct Capitalization Limit
• Historical Cost
• Accumulated Fund