Revaluation reserve
The revaluation reserve is the equity component that accumulates gains when a non-current asset is revalued upward; the gain bypasses the income statement and sits in other comprehensive income until the asset is sold.
See it move
An asset carried at €400,000 is revalued to €550,000, a €150,000 surplus. The gain never touches the income statement; it is recognised in other comprehensive income and accumulated in the revaluation reserve, a non-distributable equity balance. As the asset is later depreciated or sold, that reserve is gradually released into retained earnings.
The formula
Variables
- Assessed market or appraised value of the asset at revaluation date (€)
- Asset cost less accumulated depreciation immediately before revaluation (€)
The surplus is recognised in other comprehensive income and accumulated in the revaluation reserve within equity; it is non-distributable and does not increase retained earnings until the asset is sold or fully depreciated.