The Case Against Asset Revaluations

TLDR

The upward revaluation of non‑current assets is a common feature of contemporary accounting in Australia. This paper presents a case against the practice. The effects of revaluations are examined and possible reasons why firms revalue are considered. The paper argues that asset revaluation is theoretically unsound, inconsistent with accounting structure, and incurs significant costs with few benefits.

Abstract

The upward revaluation of non‐current assets is a common feature of contemporary accounting in Australia. This paper presents a case against the practice. The effects of revaluations are examined and possible reasons why firms revalue are considered. It is argued that asset revaluation is theoretically unsound, being inconsistent with the accounting structure within which it occurs. It is concluded that there are significant costs but few obvious benefits associated with revaluation.