Archive / 1.5.5 Valuation

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What’s this “cash generating unit” I hear and read about?

The term “cash-generating unit” or “CGU” is something you come upon when talking about performing an impairment tests for asset or group of assets, that is when you’re assessing whether the assets recoverable amount is lower of its carrying value and whether it is highest of the two, fair value less cost to sell or […]

Difference between “value in use” and “fair value less cost to sell”

There are two types of values one can find for an asset when we talk about an assets recoverable amount as compared to its carrying value. When we compare the carrying value with the recoverable amount, the latter is considered to be highest of the two, either “value in use” or “fair value less cost […]

Disposing assets with a revaluation surplus

You’re using valuation method to account for the cost of your fixed assets and every now and then you need to value your assets up leaving you with a revaluation surplus as a part of the equity. What happens if you dispose of the asset however? What happens with the revaluation surplus? Regardless of how […]

Treating accumulated depreciation when revaluing assets

When revaluing assets, your two options for dealing with current accumulated depreciation are either to eliminate it entirely or restate it proportionately. Let me explain both options with examples detailing the steps. Elimination With this option the accumulated depreciation is eliminated against the gross carrying amount of the asset with the net amount restated to […]

List of actions to take if you decided to use revaluation method for your PPE items

Let’s say you’ve initially measured your assets using the depreciation method. This means that the cost of the asset is subsequently expensed showing also the “drop in its value” and in essence what you’ve been doing so far is distribute the expense of the investment over the period it’s being used.  (more…)