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Increases in the carrying amount arising on revaluation of buildings are credited to the Revaluation Reserve except for increases that offset previous decreases charged to the Statement of Comprehensive Net Expenditure on the same asset. In these cases, increases are credited to the Statement of Comprehensive Net Expenditure to the extent of previous decreases and subsequently to the Revaluation Reserve.
Decreases that offset previous increases on the same asset are charged against the Revaluation Reserve relating to the asset; all other decreases are charged to the Statement of Comprehensive Net Expenditure.
When revalued assets are sold, the amounts included in the Revaluation Reserve are transferred to the General Reserve.
A depreciation charge is applied in the year of acquisition of an asset and no charge is made in the year in which it is disposed.
Depreciation is charged to the Statement of Comprehensive Net Expenditure on the revalued amount of each property less the estimated residual value on a straight-line basis over their expected useful lives of up to a maximum of 55 years. Where an item of property has significant components, the components are depreciated separately, in accordance with their useful lives. The useful lives of property assets are determined in consultation with Graham & Sibbald, Chartered Surveyors.
The properties' residual values and useful lives are reviewed, and adjusted if appropriate, at the date of each Statement of Financial Position.
The difference between depreciation based on the revalued carrying amount of the asset charged to the Statement of Comprehensive Net Expenditure and depreciation based on the asset's original cost is transferred from the Revaluation Reserve to the General Reserve.
As stated in the Government Financial Reporting Manual (FReM), it is for accounts preparers, in consultation with their valuers and using the RICS Red Book, to determine the most appropriate revaluation process for an asset: