## Treatment of Revaluation Gains and Losses
### Rule: Entire Class Must Be Revalued
Revaluation cannot be applied selectively to a single asset. If one item is revalued, every asset in the same class must be revalued.
Class of PPE = assets having similar nature + similar use + similar characteristics.
| Scenario | Allowed? |
|---|---|
| Revalue only 1 office building out of 5 | ✗ Not allowed |
| Revalue all office buildings | ✓ Allowed |
| Revalue office buildings but not factory buildings | ✓ Allowed (different classes) |
---
### Gain/Loss Treatment Framework
#### First-Time Revaluation
| Result | Accounting Treatment |
|---|---|
| Gain | Credit Revaluation Reserve (under Reserves & Surplus in B/S) |
| Loss | Debit P&L (charged to income statement) |
#### Subsequent Revaluation (after a prior revaluation exists)
| Prior Event | Current Event | Treatment |
|---|---|---|
| Prior Gain in RR | Subsequent Loss | First debit RR (to extent of prior RR balance); excess loss → P&L |
| Prior Loss in P&L | Subsequent Gain | First credit P&L (to extent of prior P&L loss recognised); excess gain → RR |
---
### Summary Decision Tree
```
Revaluation Result
├── GAIN
│ ├── First time → Revaluation Reserve (RR)
│ └── Subsequent (prior loss in P&L)
│ ├── Gain ≤ Prior P&L loss → Entire gain to P&L
│ └── Gain > Prior P&L loss → P&L (up to prior loss) + RR (excess)
└── LOSS
├── First time → P&L
└── Subsequent (prior gain in RR)
├── Loss ≤ Prior RR balance → Entire loss adjusted in RR
└── Loss > Prior RR balance → RR (up to balance) + P&L (excess)
```