ASSET REVALUATION PROCESS IN SAP

Revaluation of Fixed Assets:

Revaluation of fixed assets is the process of increasing or decreasing their carrying
value in case of major changes in fair market value of the fixed asset. International
Financial Reporting Standards (IFRS) require fixed assets to be initially recorded at cost
but they allow two models for subsequent accounting for fixed assets, namely the cost
model and the revaluation model.
Cost Model:
In cost model the fixed assets are carried at their historical cost less accumulated
depreciation and accumulated impairment losses. There is no upward adjustment to
value due to changing circumstances.
Revaluation Model
In revaluation model an asset is initially recorded at cost but subsequently its carrying
amount is increased to account for any appreciation in value. The difference between
cost model and revaluation model is that revaluation model allows both downward and
upward adjustment in value of an asset while cost model allows only downward.
adjustment due to impairment loss.
After revaluation depreciation calculation method change from cost model to
Revaluation
model.
Depreciation = Revaluation Amount/Remaining useful life.
Some requirement
1)
2)
3)
4)

Once in a Year and at the Year End period

Old Asset transfer to new Asset. (LSMW for mass)
Depreciation will start at beginning of next month.
Unplanned depreciation need to charge (if required).

Example - Capitalization period 15th Jan and Depreciation start date 1st Feb. So
need to charge 15 days depreciation as unplanned depreciation to the asset.

Assets revaluation is standard feature offered by SAP. Fixed assets can be revalued
at month end or year end to present true and fair value of noncurrent assets in
financial statements. JACO and JIPCO can revalue its assets as and when required,
though JAOC and JIPCO has not yet revalued its noncurrent assets to date.
The Accounting Entries will be;
Asset Revaluation value;
Asset APC (With Revaluation amount)
Revaluation Account (Equity)

Dr.
Cr.

Revaluation Depreciation;
Revaluation Depreciation
Accumulated Depreciation

Dr.
Cr.