Revaluation model for property

IFRS permits carrying PP&E classes at fair value with regular revaluations; some regional groups revalue land and buildings for balance sheet strength, which brings recurring valuation and equity-reserve mechanics. Selective or infrequent revaluation misstates net assets and equity used in lender covenants, incorrect recycling of the surplus through profit or loss overstates reported earnings on disposal, and stale valuations can materially misrepresent balance sheet strength presented to banks and investors.

Has the revaluation model been elected and applied to the entire class of assets (e.g. all land and buildings), not cherry-picked for individual items? Is the valuation performed by an appropriately qualified, ideally independent, valuer at a frequency sufficient to keep carrying amount close to fair value? Is the revaluation surplus tracked per asset and correctly routed through OCI (with any deficit reversing a prior surplus first), rather than recycled through profit or loss on disposal?

1. Confirm the accounting policy election: the revaluation model may only be adopted class-by-class (e.g. all land and buildings together), never for a single asset within a class - identify the full population of assets in the class before revaluing any of them.
2. Engage an appropriately qualified, and where possible accredited/independent, valuer and agree the valuation basis (normally fair value) and date.
3. Set a revaluation frequency policy sufficient to ensure the carrying amount does not differ materially from fair value at each reporting date - document the policy (e.g. every three years, or annually for volatile assets) and follow it consistently rather than skipping cycles.
4. On each revaluation, compare the new fair value to carrying amount: if it is an increase, credit other comprehensive income and accumulate in a revaluation surplus within equity, unless it reverses a previous downward revaluation of the same asset previously charged to profit or loss (in which case recognize the reversal in profit or loss up to that prior expense, with any excess to OCI).
5. If it is a decrease, charge profit or loss, unless there is a credit balance in the revaluation surplus for that same asset, in which case the decrease is first debited against that surplus (through OCI) and only the excess goes to profit or loss.
6. Continue depreciating the revalued carrying amount over remaining useful life; as the surplus is realized (through use or on disposal), an optional transfer of the realized surplus may be made directly within equity from revaluation surplus to retained earnings (never through profit or loss).

Basis: fair value at the date of revaluation, being the price that would be received to sell the asset in an orderly transaction between market participants, less subsequent accumulated depreciation and any subsequent impairment. Included: the entire class of assets to which the item belongs (e.g. all land and buildings, not a subset); directly attributable subsequent depreciation continues to be charged on the revalued amount over remaining useful life. Excluded: piecemeal revaluation of individual assets within a class while others remain at cost is not permitted; the revaluation surplus is never routed through profit or loss on subsequent realization. Re-measurement trigger: revalue with sufficient regularity that carrying amount does not differ materially from fair value at each reporting date - a significant movement in the property market, a change in use, or a documented policy date (e.g. every 3 years) should each trigger a fresh valuation; impairment indicators are also assessed at each reporting date independently of the revaluation cycle.

Effective date of revaluation and whether an independent valuer was involved; methods and significant assumptions applied in estimating fair values (including whether derived from an active market or estimated using other techniques); carrying amount that would have been recognized had the assets been carried under the cost model, for each revalued class; the revaluation surplus, including the movement for the period and any restrictions on its distribution to shareholders; which class(es) of PP&E are subject to the revaluation model versus the cost model; amounts of any downward revaluations recognized in profit or loss during the period, separately identified.

• Revaluing only assets expected to show gains ('
• cherry-picking'
• ) while leaving other assets in the same class at cost, which breaches the whole-class requirement
• allowing multiple years to pass without revaluation such that carrying amount diverges materially from fair value, breaching the '
• sufficient regularity'
• requirement
• recycling the revaluation surplus through profit or loss on disposal of the asset instead of transferring it directly within equity to retained earnings
• continuing to depreciate on the pre-revaluation cost basis instead of the new revalued amount
• failing to track the revaluation surplus on an asset-by-asset basis, making it impossible to correctly apply a later downward revaluation against the specific asset'
• s own surplus.