## Subsequent Measurement of PPE under AS 10
After initial recognition, an entity chooses one of two accounting models and applies it consistently to an entire class of PPE.
---
### Two Models
| Model | Carrying Amount |
|---|---|
| Cost Model | Cost − Accumulated Depreciation − Accumulated Impairment |
| Revaluation Model | Fair Value at revaluation date − Subsequent accumulated depreciation |
---
## Cost Model
Simple and stable: asset is carried at cost less accumulated depreciation. No market value adjustments.
```
Carrying Amount (year-end) = Cost − (Annual Depreciation × Years elapsed)
```
---
## Revaluation Model
### Key Rules
| Rule | Detail |
|---|---|
| Entire class revalued | Cannot cherry-pick individual assets — whole class (e.g., all buildings) must be revalued |
| Frequency — volatile / significant changes | Revalue annually |
| Frequency — insignificant changes | Revalue every 3–5 years |
| Revaluation Gain | Credit to OCI → Revaluation Reserve (in Equity / SHF) — unrealised |
| Revaluation Loss | Debit P&L (unless reversing a prior gain → debit OCI) |
| Transfer to Retained Earnings | Revaluation Reserve may be transferred to Retained Earnings as asset is used or disposed |
---
### Journal Entry — Revaluation Gain
```
PPE A/c Dr [FV − Carrying Amount]
To Revaluation Reserve (OCI) [Gain amount]
```
---
### Treatment of Accumulated Depreciation on Revaluation Date
Two acceptable methods:
#### Method 1 — Net Method
1. Eliminate accumulated depreciation against gross block
2. Restate net block to Fair Value
3. Single journal entry adjusting gross asset account
```
Accumulated Depreciation A/c Dr [Full Acc. Depr.]
PPE A/c Dr [FV − Net Block] ← or credit if FV < NB
To PPE A/c [Acc. Depr. eliminated]
To Revaluation Reserve (OCI) [Net gain]
```
(In practice, two entries: first close Acc. Depr., then adjust asset to FV.)
#### Method 2 — Gross Method (Proportional Restatement)
Step 1: Calculate Revaluation Gain % on Net Block:
```
Gain % = (FV − Net Block) / Net Block × 100
```
Step 2: Apply Gain % proportionally:
- New Gross Block = Old Gross Block × (1 + Gain%)
- New Acc. Depr. = Old Acc. Depr. × (1 + Gain%)
Step 3: Pass journal entry for the gross adjustments.
---
### Post-Revaluation Depreciation
After revaluation, depreciation is charged on the new carrying amount over the remaining useful life:
```
New Annual Depreciation = Revalued Carrying Amount ÷ Remaining Useful Life
```