Definition
Revaluation Reserve
A revaluation reserve is the increase in the carrying value of an asset, typically property, recorded directly in equity when the asset is revalued upward.
When a company chooses the revaluation model under Ind AS 16 for assets like land and buildings, increases in fair value are credited to a revaluation reserve in equity rather than to profit. This lifts reported net worth without affecting the income statement.
Because it reflects unrealised gains, the revaluation reserve is generally not available for dividend distribution, and analysts often exclude it when assessing tangible book value. A large revaluation reserve can inflate book equity, so it warrants care in valuation.
Related terms
- Book ValueBook value is a company's net worth on its balance sheet, total assets minus total liabilities, representing what shareholders own on paper.
- ImpairmentImpairment is the write-down of an asset's carrying value when its recoverable amount falls below what is recorded on the balance sheet.
- Retained EarningsRetained earnings are the cumulative profits a company has kept and reinvested rather than paid out as dividends, forming part of shareholders' equity.
- Shareholders' EquityShareholders' equity is the residual interest in a company's assets after deducting liabilities, comprising share capital, reserves and retained earnings.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.