Revalue a Class of ROU Assets

Revalue every right-of-use (ROU) asset in one asset class at a single period end: record a fair value for each lease in the class, then apply the revaluation as a whole. The revaluation model exists under IFRS 16 and FRS 102 only; ASC 842 has no revaluation model. For where revaluation fits in the wider accounting flow, see How Lease Accounting Works.

Before you start

Two things must be in place before you can record a fair value: Lease Accounting access, and the revaluation election for the asset class.

• Lease Accounting access. Recording valuations and applying revaluations require it, and you only see revaluations whose leases you can read the accounting for.

• The asset class elected onto the revaluation model. The election is made per asset class in the reporting entity's policy election set for the standard. Under Setup → Accounting → Policy Election Sets, open the set for your standard and use the Right-of-Use Asset Revaluation section: Carry at Revalued Amounts? turns the model on for the class, How Often Is the Class Revalued? offers Every Year, Every 2 Years, Every 3 Years, or Every 5 Years, and When Does the Surplus Move to Retained Earnings? offers Stays in Equity, When the Lease Ends, or As the Asset Is Used.

Foreign-currency leases are not revalued yet.

Record fair values for each lease in the class

A revaluation run starts when you record the first fair value on a lease's book. You cannot create one from the Revaluations list; later values for the same reporting entity, standard, asset class, and valuation date join that run.

1. Open the lease and go to its Accounting page.

2. Click Record fair value.

3. Choose the Valuation Date: the last day of an accounting period that has already passed. The whole asset class is revalued at this date.

4. If the book has more than one currency, choose the Currency.

5. Enter the Fair Value. The form shows the carrying amount and calculates how the change is booked: the Revaluation Surplus (OCI), any gain or loss in profit or loss, and the revaluation reserve after the revaluation.

6. Fill in the Valuer facts: the Valuer, whether it was an Independent Valuer, the Valuation Technique (Market Approach, Income Approach, or Cost Approach), the Fair Value Hierarchy Level (Level 2 or Level 3), Valuer Qualifications, Significant Assumptions, and Restrictions on Distributing the Surplus.

7. Save. The confirmation tells you how many leases in the class still need a fair value and links to View revaluation.

You can also record values from the run itself. Open Accounting → Revaluations and open the run, then use the Set Fair Value action on a lease's row. This form asks only for the Fair Value in that row's currency and records it against the run's valuation date.

Apply or discard the revaluation

A revaluation is one asset class revalued at one period end for one reporting entity and standard, with a fair value per lease and currency. The run applies only after every lease in the class has a value, and it applies as a whole. A run moves through five states: Draft while fair values are still being recorded, Applying while it is being booked, Applied once every lease was revalued and its entries derived, Failed when booking stopped and nothing was revalued, and Discarded when it was abandoned.

1. Open Accounting → Revaluations and open the run. The detail page shows the valuation facts and a Leases in the Class table, where each row is either Needs a Value or Recorded.

2. Record any missing fair values with Set Fair Value.

3. Click Apply revaluation and confirm. The action stays unavailable until every lease in the class has a fair value.

While it runs, the status is Applying. When it finishes, every lease in the class was revalued and its entries derived, and the status is Applied.

If booking stops, the status is Failed and the page shows a Why It Was Not Applied section with the reason, such as "A lease in the class could not be revalued, so none were. Nothing was changed." Nothing was revalued, and the run stays open so you can correct the problem and apply again.

Discard abandons the run. The recorded fair values are kept for reference, but nothing is booked.

What the revaluation does to the accounting

The revaluation takes effect the day after the valuation date. The ROU asset is respread on its amortization schedule from its new carrying amount, while the liability schedule carries forward unchanged.

The revaluation surplus moves to retained earnings according to the election you made for the class. With As the Asset Is Used, each period transfers the depreciation above cost to retained earnings, and the rest transfers when the lease ends. These transfers are journal entries that debit the revaluation reserve and credit retained earnings.

Revalued asset classes appear in the IFRS 16 and FRS 102 disclosures. Two report datasets carry the data: ROU Asset Revaluations and ROU Fair Value Valuations. Both datasets are meant to be filtered to one accounting standard.

Investment property is a separate workflow

Investment property carried at fair value is not part of the class-wide ROU revaluation run. It has its own election in the policy election set, How Is Investment Property Measured? in the Investment Property section, and its own measurement questions. A valuation for investment property is recorded through an Asset Change with the action Remeasure at fair value.