Revaluation Method of Depreciation (Cambridge International IGCSE Accounting)

Revaluation depreciation

What is the revaluation method of depreciation?

• The revaluation method of depreciation involves performing a valuation of assets at the end of the financial year to determine the reduction in value

• This method is commonly used for assets of smaller value

  • Such as loose tools, packing cases

Example of an asset, which cost $20 000, being charged depreciation using the revaluation method each year

How do I calculate depreciation using the revaluation method?

• A revaluation of the non-current asset will be given in the question

• You need to identify two numbers:

  • The net book value before the revaluation
  • The net book value after the revaluation

• The depreciation charge is the value before minus the value after

Worked Example Abi purchased fixtures and fittings for $5 000 on 1 March 2023. On 29 February 2024, at the end of the financial year, the fixtures and fittings were valued at $3 650.

Calculate the depreciation charged for the financial year ending on 29 February 2024.

Answer:

• Value before the revaluation is $5 000
• Value after the revaluation is $3 650
• Calculate the difference

$5 000 - $3 650 = $1 350