Accounting glossary term
Revaluation Reserve
The revaluation reserve is an equity account that holds the unrealized gain when a non-financial asset (typically property, plant, or equipment) is revalued upward under IAS 16. It keeps the gain out of the income statement until the asset is sold or impaired.
What is Revaluation Reserve?
The revaluation reserve is an equity account that holds the unrealized gain when a non-financial asset (typically property, plant, or equipment) is revalued upward under IAS 16. It keeps the gain out of the income statement until the asset is sold or impaired.
How It Works
- Triggered when the company chooses the revaluation model under IAS 16 for a class of PPE
- Gains on revaluation: credited to a revaluation reserve in equity (via OCI)
- Losses: charged to P&L unless they reverse a prior revaluation surplus
- On disposal: the reserve is transferred directly to retained earnings (not P&L)
- Land and buildings are the most common items revalued in this way
Saudi Context
Saudi companies that revalue land or buildings — common in older industrial groups and family businesses with significant real estate — disclose the revaluation reserve in the equity section. SOCPA-aligned auditors review the valuation methodology and the supporting appraisers’ reports.
Example
A Saudi manufacturer revalues its plant land from a carrying amount of SAR 80M to a current fair value of SAR 120M. The SAR 40M uplift sits in a revaluation reserve in equity. Later, when the land is sold, the SAR 40M is moved to retained earnings, never touching the income statement.
Related Terms
- Fair Value Model