1. The Cost Model
Both frameworks permit the cost model. Under this model, after initial recognition, an item of PPE is carried at its cost less any accumulated depreciation and any accumulated impairment losses.
2. The IFRS Revaluation Model (IAS 16)
IFRS permits an alternative subsequent measurement framework: the Revaluation Model. If an item of PPE’s fair value can be measured reliably, it can be carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses.
  • Frequency: Revaluations must be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period.
  • Class Consistency: If an item of PPE is revalued, the entire class of PPE to which that asset belongs must be revalued simultaneously to prevent selective asset window dressing.

3. Technical Accounting for Revaluation Adjustments
The accounting treatment for fluctuations in asset value under the revaluation model depends on whether the adjustment is an upward or downward movement:
                          ┌───────────────────────────┐
                          │   Revaluation Movement    │
                          └─────────────┬─────────────┘
                                        │
             ┌──────────────────────────┴──────────────────────────┐
             ▼                                                     ▼
 ┌───────────────────────┐                             ┌───────────────────────┐
 │   Upward Adjustment   │                             │  Downward Adjustment  │
 └───────────┬───────────┘                             └───────────┬───────────┘
             │                                                     │
    Credit to Other Compre-                               Debit to Profit or Loss
    hensive Income (OCI) and                              as an expense, unless
    accumulated in Equity under                           it reverses a previous
    "Revaluation Surplus."                                gain held in OCI.

  • Reversing a Downward Trend: If an upward revaluation reverses a previous revaluation decrease of the same asset that was recognized in profit or loss, the increase is recognized in profit or loss to the extent of the previous deficit.
  • Reversing an Upward Trend: If a downward revaluation occurs, the decrease is recognized in OCI to the extent of any credit balance existing in the revaluation surplus regarding that specific asset. Any excess deficit is recognized immediately in profit or loss.

 
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