## AS 28 — Advanced: Revaluation Model with Excess Depreciation Transfer
### The Core Problem
When an asset is upward revalued, the new depreciation (based on the higher revalued amount) is greater than what it would have been at cost. This difference is the excess depreciation.
Each year, this excess depreciation is silently transferring value out of the Revaluation Reserve into Retained Earnings — so by the time an impairment occurs, the RR balance is lower than the original surplus.
---
### Excess Depreciation Transfer (Annual)
```
Excess Depreciation p.a. = Depreciation after revaluation
− Depreciation at cost (original rate)
Dr Revaluation Reserve XXX
Cr Retained Earnings (Reserves) XXX
```
> This is a reserve movement — it does NOT go through P&L. It represents the difference between the higher depreciation being charged on the revalued asset vs. what would have been charged at cost.
---
### RR Balance Available at Date of Impairment
```
Original Revaluation Reserve XXX
Less: Cumulative excess depreciation
transferred to Retained Earnings (XXX)
─────────────────────────────────────────────
RR Balance available for impairment set-off XXX
```
---
### Step-by-Step: Impairment under Revaluation Model
Step 1 — Compute revaluation surplus (original RR).
Step 2 — Compute excess depreciation per year:
```
Excess = Dep p.a. (post-revaluation) − Dep p.a. (pre-revaluation at cost)
```
Step 3 — Compute cumulative excess transferred:
```
Cumulative = Excess p.a. × Number of years since revaluation
```
Step 4 — Remaining RR at impairment date:
```
Remaining RR = Original RR − Cumulative excess
```
Step 5 — Set off impairment loss:
```
Dr Revaluation Reserve [up to remaining RR]
Cr PPE
Dr P&L (Impairment Loss) [balance, if any]
Cr PPE
```
---
### After Impairment: RR Balance = NIL (or residual)
Once RR is used up in the impairment, the balance becomes zero. The revised carrying amount = RA.