1. The Cost Model vs. Revaluation Model
Under international guidelines, a company can choose how to value its non-current assets over time:
  • Cost Model: The asset is carried at its historical cost minus accumulated depreciation and impairment losses.
  • Revaluation Model: The asset is carried at its fair market value on the revaluation date minus any subsequent depreciation.

2. Revaluation Surplus Architecture
When an asset (such as land or buildings) increases in value, the gain cannot be recorded as regular profit on the Income Statement, because the profit has not been realized through a sale. Instead, the increase is sent to a special equity account called the Revaluation Surplus (part of Other Comprehensive Income).
3. Revaluation Ledger Mechanics
  • Scenario: A piece of freehold land purchased for $100,000 is officially revalued to $140,000.
  • Entry: Debit Land Asset Account $40,000 | Credit Revaluation Surplus (Equity) $40,000.

Date         Account Titles & Explanation          Ref       Debit ($)    Credit ($)
-------------------------------------------------------------------------------------
2026-08-15   Freehold Land Asset                   1500         40,000
                Revaluation Surplus (Equity)       3400                    40,000
             (To record the upward revaluation of freehold 
              land to current market value)
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