Skip to content

Financial Accounting · Property, Plant and Equipment (AS 10)

Revaluation of PPE and Subsequent Measurement under AS 10

Updated 10 October 2026 · Fact-checked

After recognition, AS 10 lets you carry PPE at cost less depreciation and impairment (cost model) or at fair value less later depreciation and impairment (revaluation model). The policy applies to a whole class. A revaluation increase goes to revaluation surplus; a decrease goes to profit and loss, unless a surplus exists for that asset.

Understand Revaluation of PPE and Subsequent Measurement

Once an item of PPE is recognised, you must choose how to carry it in later years. AS 10 gives two choices. Under the cost model (para 33) the asset stays at cost less accumulated depreciation and accumulated impairment losses. Under the revaluation model (para 34) the asset is carried at its fair value on the revaluation date, less any later accumulated depreciation and impairment losses. The revaluation model is available only if fair value can be measured reliably.

The choice is an accounting policy and applies to an entire class of PPE (para 32). A class is a grouping of assets of similar nature and use, such as land, land and buildings, machinery, ships, aircraft, motor vehicles, furniture and fixtures, office equipment and bearer plants (para 40). If you revalue one item, you must revalue the whole class (para 39). Items are revalued together to avoid selective revaluation and a mix of costs and values at different dates. A rolling revaluation is allowed only if the class is completed within a short period and kept up to date (para 41).

Revaluations must be made often enough that the carrying amount does not differ materially from fair value at the balance sheet date (para 34). There is no fixed gap in years in the text you are given. The more volatile the fair values, the more often you revalue.

The gain or loss treatment is the heart of the topic. An increase is credited directly to owners' interests as revaluation surplus, except to the extent it reverses a decrease of the same asset earlier charged to profit and loss; that part is credited to profit and loss (para 42). A decrease is charged to profit and loss, except that it is debited to revaluation surplus to the extent of any credit balance existing for that asset (para 43). Always work asset by asset, not for the class as a whole.

After revaluation, depreciation is charged on the revalued carrying amount. The surplus may be transferred to revenue reserves when the asset is derecognised, or in part as the asset is used. The part transferred is the difference between depreciation on the revalued amount and depreciation on original cost. This transfer does not go through profit and loss (para 44).

Key rules to remember

Revaluation gain or loss
Revaluation difference = Fair value − Carrying amount before revaluation
Positive means increase, negative means decrease. Compute it for each asset separately.
Treatment of increase (para 42)
Increase → Revaluation Surplus (credit), except up to earlier decrease charged to P&L of the same asset → credit P&L
Reversal of an earlier P&L loss comes first; the balance goes to surplus.
Treatment of decrease (para 43)
Decrease → debit Revaluation Surplus up to its credit balance for that asset; excess → debit P&L
Surplus of one asset cannot absorb the loss of another.
Depreciation after revaluation
Annual depreciation = (Revalued carrying amount − Residual value) ÷ Remaining useful life (straight line)
Use the revised carrying amount and the remaining life from the revaluation date.
Surplus transfer as asset is used (para 44)
Transfer to revenue reserves = Depreciation on revalued amount − Depreciation on original cost
Transfer is made directly, not through the statement of profit and loss. It is permitted (may be transferred), not compulsory.
Policy scope (paras 32, 39)
Cost model or revaluation model chosen for the entire class
Revaluing one asset means revaluing the whole class.

How to solve Revaluation of PPE and Subsequent Measurement questions

Use this order for any revaluation question. It keeps the entries and the surplus balance correct.

  1. 1Identify the class of the asset and confirm the revaluation model is used for the whole class.
  2. 2Find the carrying amount on the revaluation date: cost less accumulated depreciation (and impairment) up to that date. Charge depreciation up to the date first if needed.
  3. 3Compute the difference between fair value and carrying amount for each asset separately.
  4. 4If it is an increase, check whether the same asset had an earlier decrease charged to profit and loss. Credit P&L up to that amount; credit the balance to Revaluation Surplus.
  5. 5If it is a decrease, check the existing surplus for that asset. Debit surplus up to its balance; debit P&L for the excess.
  6. 6Pass the journal entry. Show the asset adjustment using either restated gross carrying amount with adjusted accumulated depreciation, or elimination of accumulated depreciation against gross amount (para 38).
  7. 7Charge depreciation on the revalued amount over the remaining life, and if asked, compute the transfer from surplus to revenue reserves.
  8. 8Show the closing carrying amount and the surplus balance clearly, and note disclosure points if the question asks.

Quickest way: Surplus ledger tracking

When to use it: Use this when a question has several revaluations of the same asset over many years, or several assets in one class.

  1. Draw a small running table for each asset: carrying amount, fair value, difference, surplus balance, P&L effect.
  2. Mark increases as surplus and decreases as first against surplus, then P&L.
  3. Remember that a later increase first reverses an earlier P&L charge.
  4. Do not net assets of the class against each other.
  5. Close with the new carrying amount and recompute depreciation on it.

Common mistakes in Revaluation of PPE and Subsequent Measurement

  • Crediting every revaluation increase to the statement of profit and loss.

    Students treat a gain like ordinary income.

    Fix: Credit it to Revaluation Surplus. Only the part that reverses an earlier P&L decrease of the same asset goes to P&L.

  • Debiting a revaluation decrease fully to P&L even when a surplus exists.

    Students forget para 43 lets the surplus absorb the loss first.

    Fix: Check the surplus balance of that asset and debit it first; only the excess hits P&L.

  • Revaluing only one asset of a class.

    The question mentions one machine and students stop there.

    Fix: Remember paras 39 and 41: the whole class must be revalued, except under a short rolling revaluation. State this in your answer.

  • Netting a gain on one asset against a loss on another.

    Students look at the class total.

    Fix: Calculate for each asset individually, as the surplus is tracked asset by asset.

  • Charging depreciation on original cost after revaluation.

    Students keep the old schedule.

    Fix: Depreciate the revalued carrying amount over the remaining useful life.

  • Passing the surplus transfer to revenue reserves through profit and loss.

    Students think the extra depreciation must be offset in P&L.

    Fix: Transfer directly from Revaluation Surplus to revenue reserves. Para 44 says it is not made through the statement of profit and loss.

Worked examples

Example 1

Entity A uses the revaluation model for its machinery class. A machine costing ₹10,00,000 was bought on 1 April 2024 and is depreciated straight line over 10 years with nil residual value. On 31 March 2026 its fair value is ₹10,40,000. Pass the revaluation entry using the elimination of accumulated depreciation method (para 38(b)) and compute depreciation for the next year, assuming the remaining life is 8 years.

Show the solution
  1. Accumulated depreciation at 31 March 2026 = ₹10,00,000 ÷ 10 × 2 = ₹2,00,000.
  2. Carrying amount = ₹10,00,000 − ₹2,00,000 = ₹8,00,000.
  3. Revaluation increase = ₹10,40,000 − ₹8,00,000 = ₹2,40,000. No earlier decrease exists, so all goes to surplus.
  4. Entry: Accumulated Depreciation A/c Dr ₹2,00,000; Machinery A/c Dr ₹40,000; to Revaluation Surplus A/c ₹2,40,000. Machinery now stands at ₹10,40,000.
  5. Next year depreciation = ₹10,40,000 ÷ 8 = ₹1,30,000.

Answer: Revaluation surplus ₹2,40,000 is credited; machinery is carried at ₹10,40,000; depreciation for the next year is ₹1,30,000.

Example 2

Entity B uses the revaluation model for its land class. Land A was carried at ₹50,00,000 at cost. At the end of Year 1 it was revalued to ₹44,00,000. At the end of Year 2 it was revalued to ₹53,00,000. Land has no depreciation. Show the treatment each year.

Show the solution
  1. Year 1: decrease = ₹50,00,000 − ₹44,00,000 = ₹6,00,000. There is no surplus for Land A, so the full ₹6,00,000 is charged to profit and loss.
  2. Entry Year 1: Revaluation Loss (P&L) A/c Dr ₹6,00,000; to Land A/c ₹6,00,000.
  3. Year 2: increase = ₹53,00,000 − ₹44,00,000 = ₹9,00,000.
  4. Part reversing the earlier P&L loss = ₹6,00,000, credited to P&L (para 42).
  5. Balance = ₹9,00,000 − ₹6,00,000 = ₹3,00,000, credited to Revaluation Surplus.
  6. Entry Year 2: Land A/c Dr ₹9,00,000; to Profit and Loss (reversal of revaluation loss) ₹6,00,000; to Revaluation Surplus ₹3,00,000.

Answer: Year 1: ₹6,00,000 loss in P&L. Year 2: ₹6,00,000 credited to P&L and ₹3,00,000 credited to Revaluation Surplus; land is carried at ₹53,00,000.

Exam tips

  • Write the class and the policy statement first. Examiners give marks for stating that the whole class is revalued.
  • Show the carrying amount calculation before the revaluation entry. Depreciation up to the revaluation date is a common hidden step.
  • For multi-year problems, keep a running surplus balance per asset so the decrease rule is easy to apply.
  • In MCQs, remember the test words: increase goes to surplus, decrease goes to P&L unless surplus exists, and the surplus transfer is not through P&L.
  • Write the para number beside your rule, such as para 42 or 43, only where you are sure of it.

Practice questions from Property, Plant and Equipment (AS 10)

Revaluation of PPE and Subsequent Measurement in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Revaluation of PPE and Subsequent Measurement: frequently asked questions

Can I revalue only one asset under AS 10?

No. If one item is revalued, the entire class of PPE to which it belongs must be revalued (para 39). A rolling revaluation of a class is allowed only if it is completed within a short period and kept up to date.

Where is a revaluation increase recorded?

It is credited directly to owners' interests as revaluation surplus. The exception is the amount that reverses a revaluation decrease of the same asset earlier recognised in profit and loss; that part is credited to profit and loss.

How is depreciation treated after revaluation?

Depreciation is based on the revalued carrying amount over the remaining useful life. The surplus may be transferred to revenue reserves as the asset is used, equal to depreciation on the revalued amount less depreciation on original cost. This transfer is not made through profit and loss.

What is the difference between the cost model and the revaluation model?

The cost model carries the asset at cost less accumulated depreciation and impairment. The revaluation model carries it at fair value on the revaluation date less later accumulated depreciation and impairment, and needs regular revaluation.