Revaluation Surplus
The increase in value when land or buildings are revalued above cost, kept in equity rather than profit, on the Balance Sheet.
In detail
When a licensed valuer revalues land or a building above its book cost, the increase is not profit earned by trading, so NFRS puts it in Revaluation Surplus inside equity rather than in the Profit and Loss. The Journal Entry debits the asset and credits this reserve. Later depreciation on the higher value is charged to expense, and when the property is sold the surplus is moved to Retained Earnings, still without passing through profit. Nepali banks often ask for a revaluation before lending against property, which is when this ledger is used. The reserve cannot be paid as a cash dividend, and the IRD taxes the gain only when the asset is sold, so keep the valuer's report attached.
Formula
Revaluation Surplus = Fair value from the valuation - Carrying amount before revaluation
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Land | Rs 10,00,000 | |
| Revaluation Surplus | Rs 10,00,000 |
How to record it in BRAccount
- 01Obtain the valuation report from a valuer accepted by the bank or the auditor.
- 02Go to Invoicing > Journal Entry > New dated the valuation date.
- 03Debit the asset ledger, such as Land, and credit Revaluation Surplus with the increase.
- 04Attach the report and submit. The entry below posts.
- 05If a later valuation falls, debit this reserve first and only the excess to Impairment Losses.
- 06On sale of the asset, transfer the surplus to Retained Earnings by Journal Entry.
When to use it
Post by Journal Entry when a registered valuer revalues property. Transfer to Retained Earnings when the asset is sold.
Example from the demo books
Dr Land Rs 10,00,000, Cr Revaluation Surplus Rs 10,00,000 after a valuer priced the Pokhara plot at Rs 70,00,000.