The company may take into account changes in the market value of various fixed assets by revaluation of fixed assets. Revaluation of fixed assets is the process of increasing or decreasing the carrying value of fixed assets of the company or a group of fixed assets taking into account any major changes in their fair market value.
Initially the asset or group of assets reflected on the balance sheet at the value paid for the asset. After that, there are two methods used to account for changes in fixed assets, or assets.
Most simple Accounting approach is the model price. Models cost, fixed assets of the enterprise are stated at their original cost less accumulated amortization and accumulated impairment losses associated with these assets. The cost model does not allow for adjustments in the direction of increasing the value of the asset based on the fair market value.
A second similar approach the model of revaluation. With the model of revaluation of fixed assets, are initially recognised at cost and the carrying amount of fixed assets may be increased or decreased depending on the current market value of the asset, typically once a year. If the asset reduces the cost, he said, to be recorded. In accordance with international financial reporting standards (IFRS), assets that are written down to their fair market value may be canceled in accordance with generally accepted accounting principles (GAAP) assets that are written off remain weak and cannot be undone.