Record asset revaluations
Compare an asset's old carrying amount with revalued amount and record the measurement change under the applicable rules.
Section 1.3 · Accounting for non-current assets
Cambridge International AS & A Level Accounting 9706, 2026–2028 syllabus, Version 2. These lessons cover Topic 1.3 only. Practice is self-checked, not an official Cambridge grade; the separately published 2029 syllabus, timed papers and human subject-teacher review remain outstanding.
Before you begin
- Topics 1.1 and 1.2 introduce business resources, equity, double entry and period profit. Use those ideas when recording non-current assets.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
An asset cost $70,000 and has $20,000 accumulated depreciation. What amount is compared to revaluation under the cost model?
What you will learn
- Calculate a revaluation increase or decrease
- Explain the journal and non-cash effect
- Recognise when previous revaluation history matters
Compare like with like
Before recording a revaluation, calculate carrying amount immediately before revaluation: cost less accumulated depreciation and other required adjustments. Compare that amount with the supported revalued amount.
An upward revaluation increases the carrying amount; a downward revaluation decreases it. The amount is not the difference between fair value and original cost unless the asset has no previous depreciation or other adjustments.
Follow the relevant treatment and history
Revaluation gains and losses are accounted for under the applicable requirements and the asset's prior history. A previous revaluation loss or gain can affect where a later change is reported.
The revaluation entry changes a measurement in the accounts; it does not create cash. Do not book a change to profit or a revaluation reserve without checking the rule and history relevant to the question.
Pause and explain
A carrying amount of $24,000 is revalued down to $21,000. What is the change?
Worked example
An asset cost $50,000 and has accumulated depreciation of $18,000. It is revalued to $38,000. Find the carrying amount before revaluation and the increase.
Show the worked solution
- Old carrying amount = 50,000 − 18,000 = $32,000.
- Increase = 38,000 − 32,000 = $6,000.
- The increase is non-cash; apply the required revaluation treatment and consider prior history.
Answer The old carrying amount is $32,000 and the increase is $6,000. Apply the relevant accounting treatment, including any prior revaluation history.
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Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
Equipment cost $90,000 and accumulated depreciation is $36,000. Its new supported value is $60,000. Calculate the amount of the upward change.
Give me a hint
Calculate the old carrying amount before comparing.
Compare my reasoning
- Old carrying amount = 90,000 − 36,000 = $54,000.
- New value = $60,000.
- Increase = 60,000 − 54,000 = $6,000.
The upward change is $6,000, subject to the applicable accounting treatment.
Look for these in your work
- Old carrying amount correct
- New amount compared
- Change calculated
A property has a carrying amount of $125,000 and is revalued to $117,000. Give the change and one item of history that may affect its accounting treatment.
Give me a hint
Calculate direction and amount; then identify prior revaluation history.
Compare my reasoning
- Change = 117,000 − 125,000 = −$8,000.
- This is a decrease.
- Check whether the same asset has a previous revaluation surplus or loss under the relevant rules.
The carrying amount falls by $8,000. Check the property's previous revaluation history before deciding where the loss is reported.
Look for these in your work
- Direction correct
- Amount correct
- History check named
A company reports a $12,000 revaluation gain, then tells a lender it has $12,000 more cash available. Explain the error.
Give me a hint
Separate a change in carrying amount from cash receipts.
Compare my reasoning
- A revaluation changes the measurement of the asset.
- No buyer or lender has paid the company as a result of the valuation entry.
- Cash availability must be assessed from bank balances and cash flows.
The gain is a non-cash accounting remeasurement. It does not provide funds to repay debt; assess cash and cash flow separately.
Look for these in your work
- Measurement effect named
- No receipt identified
- Liquidity distinction stated
Common mistakes
- Comparing revalued amount with original cost instead of current carrying amount
- Assuming every revaluation gain is ordinary income
- Ignoring a previous gain or loss when deciding the treatment
What can you explain now?
What amount should be compared with the revalued figure?
Compare with the explanation
The carrying amount immediately before revaluation
The comparison starts after accumulated depreciation and other required adjustments.
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Make it stick
Why must an accountant compare revalued amount with the carrying amount rather than original cost?
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.