How to revalue an asset based on the market value?

2 minute read time.

We revalue an asset to enter its actual value or fair market value on the revaluation date. This value refers to the amount for which an asset can be exchanged under normal conditions. It can be a positive or negative revaluation.

Revaluation processing will update the asset according to the selected revaluation method (Coefficient, Index, Market value). When the revaluation is saved, event FASREEVAL is triggered and it can be seen under detail status of context, events not posted grid.

Additionally, the revaluation can be cancelled. The cancellation process will re-assign the asset values to its pre-revaluation values (i.e. their values for the previous period). It will also update the depreciation method to its original value from residual equivalent method (RE).

Note, the market value entered during the revaluation processing is kept.

Please see the example below to understand this process.

GESCNX: Depreciation context, FY/Period – current period 01/01/20 

GESFAS: Enter a new asset – Purchase date and In service date of the asset 01/01/19

In Depreciation tab, depreciation method used ‘UL’, duration 3 years, Balance sheet value 20,000, Accumulated depreciation for the previous year 6,666.66.

View the depreciation plan simulation by period to see how much the monthly depreciation charge is.

GESGPC: Monthly depreciation charges posted to the GL using DEPREC accounting entry type for 01/31/20.

FASCLOTURE: Fixed assets periods can be closed when the status of contexts Inactive, Calculated and Posted columns are in green. Close the periods Jan. – Apr., new current period – May 2020.

GESFAS: Time to revalue the asset at market value, in fixed assets function select the ‘Revaluate’ button and select the values for the revaluation.

Revaluation method = Market value

Take effect on = Period start

Market value = 16333.34

Revaluation amount is a calculated field

Select an evaluator and enter a comment (optional)

Once you confirm the values are accurate click 'OK' and click 'Save' in the assets screen.

Revaluation will update the depreciation method to ‘RE’ method (residual equivalent).

Take a look at the plan simulation window:

New depreciation total for the year = 9,800.00

Calculation:

Remaining number of months from May. 2020 – Dec. 2021 (20 months)

16,333.34 x 0.05 (1/20) = 816.67 / month

816.67 x 12 = 9,800.00

 

TRTCPTINT: Finally, process the generation of accounting entries to post the revaluation and depreciation charges to G/L.

Run it in simulation to check the entries and once confirmed run it actual mode (uncheck the simulation check box).

GESGPC: Revaluation entry

Line 1: 3,666.66 --> difference between the original balance sheet value and the new market value

Line 2: 8888.88 --> Accumulated depreciation for 2019 and 2020 up to Apr.

Line 3: 8222.22 --> 3000 (revaluation difference) + 3000 (revaluation cancellation) + 2222.22 (accumulated depreciation for 2020 up to Apr.)

Line 4: 3000.00 --> Revaluation difference

Note, the events journal screen shows the revaluation cancellation.

Depreciation:

Line 1: 261.11 --> Depreciation expense (May original dep. 555.55 – 816.66 (new dep. Value)

Notice, there is a revaluation difference and revaluation provision reversal lines in the depreciation entry to reverse the revaluation difference (reserve) 5222.22 /20 =261.11.