Revaluation

Revaluation of fixed assets

rhas New Zealand provides a full range of revaluation services for any business, anywhere.

A revaluation of fixed assets is a method that may be required to accurately describe the true value of the capital goods a business owns.

Fixed assets are held by an organisation for the purpose of producing goods or delivering services, as opposed to being held for resale in the normal course of business. For example, machines, buildings, patents or licences can be fixed assets of a business.

The purpose of rhas New Zealand providing a revaluation is to bring into the books the fair market value of fixed assets. This may be helpful in order to decide whether to invest in another business. If a company wants to sell one of its assets, it is revalued in preparation for sales negotiations.

Reasons for revaluation

It is common to see companies revaluing their fixed assets. The purposes are varied:

To state the real rate of return on capital.
To conserve adequate funds in the business for replacement of fixed assets at the end of their useful lives. Provision for depreciation based on historic cost will show inflated profits and lead to payment of excessive dividends.
To show the fair market value of assets which have considerably appreciated since their purchase such as land and buildings.
To negotiate fair price for the assets of the company before merger with or acquisition by another company.
To enable proper internal reconstruction, and external reconstruction.
To issue shares to existing shareholders (rights issue) or for an external issue of shares (public issue of shares).
To get fair market value of assets, in case of sale and leaseback transaction.
When the company intends to take a loan from banks/financial institutions by mortgaging its fixed assets. Proper revaluation of assets would enable the company to get a higher amount of loan.
Sale of an individual asset or group of assets.
In financial firms revaluation reserves are required for regulatory reasons. They are included when calculating a firm's funds to give a fairer view of resources. Only a portion of the firm's total funds (usually about 20%) can be loaned or in the hands of any one counterparty at any one time (Large Exposure Regulations).

rhas New Zealand is a global firm, able to deliver revaluation services across all industries. Please contact us to find out more.

Sources: Wikipedia