Revaluation : is to adjust cost or to revise cost of asset for further estimation of asset depreciation.
Generally, revaluation takes place in the main cases such as:
- Repair and
- Credit / Debit Note (liability increase, liability decrease)
In both cases in accounting system, revaluation shall be done in 2 ways as follows.
- Change particularly in cost but expiry date of depreciationstill remainedthe same,such as asset repair expense in case of small repair or Credit Note and Debit Note. For example, in purchase of asset for 100,000 Baht with 5 years of DP estimation, it is assumed that DP has already estimated for 3 months, showing that 4 years and the other 9 months of DP is remained. When estimating DP at the fourth month, Credit Note is received to decrease liability for 20,000 Baht, showing that this asset estimates DP in the amount of 80,000 Baht for the other 4 years and 9 months, starting from the revalued month henceforth which is the fourth month. This is the revaluation particularly at cost but DP life is expired as before.
- Simultaneously change in cost and extend D/P life such as asset repair expense in case of big asset repair or OVERHUAL. From the example of asset in Point 1., the asset is valued for 100,000 Baht and 5 years of DP is estimated. It is assumed that DP has already estimated for 4 years and 1 year is remained and then DP will be expired. However, in the fifth year, OVERHUAL occurs with another repair expense for 50,000 Baht, showing that this asset can further work. It is assumed that Auditor assigns to estimate DP for additional 3 years, showing that this asset must be changed in cost and extended in its useful life as well.. The estimation of depreciation in this case is done using the balance Net Value as of revaluation completion and divided by number of days with DP remaining and then multiplied by number of days estimated for DP.