Why do we need a revaluation of fixed assets?

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Revaluation of fixed assets is required when they wear out during the production process. The current legislation has established the classification of this type of assets, the period of their useful life, the procedure for depreciation. Any company has the right to assign increasing coefficients for depreciation charges on its own, as well as choose the appropriate depreciation method.

Even taking into account the fact that the revaluation of fixed assets gives enterprises the opportunity to significantly save on tax deductions or increase the value of their assets, not all of them use the opportunities provided by law when accounting. When carrying out this operation, you can reduce income tax by increasing the depreciation rate. It should be noted that depreciation charges during the period of use of fixed assets are carried out evenly, but at the same time, market pricesequipment changes at different rates. The result of all this is that there is a big difference between the market and book values of the equipment, and this distorts the data on the real cost of the equipment.

Evaluation and revaluation of fixed assets is also required in order to be able to more accurately determine financial indicators, which without these procedures are distorted, giving an incorrect idea of real investment needs. With understated depreciation, it is not possible to fully compensate for the process of disposal of fixed assets. When the revaluation of fixed assets is carried out regularly, this allows you to bring the market and book values into line. This is the only way to effectively manage the non-working capital of the company. This procedure has a positive effect on profitability indicators, the amount of net assets, their turnover, which improves the financial performance of the organization.

Revaluation of fixed assets is a very time-consuming process that requires certain materials, as well as experienced professionals. When transferring or selling part of the property, this procedure will determine its real market value. Typically, the revaluation procedure is carried out once a year. It is produced by determining the current or initial cost, the accrued depreciation amount for the operational period. During this process, experts make an inventory of objects, after whichdetermine the financial models that are optimal. The revaluation of fixed assets, the entries for which must be taken into account in the balance sheet, is part of the nationwide activities aimed at determining the price of the organization's property. With a timely procedure, the company can not only increase the price of assets, but also get opportunities to increase the size of the company's authorized capital.

Revaluation of fixed assets can be carried out by the organization independently or with the involvement of third-party experts in this field. This procedure can be carried out both for the organization as a whole and for its individual divisions.