Meaning & use
revaluation reserve
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Meanings
nouncountablebusinessfinancetechnical
A part of shareholders' equity that records increases in the value of assets when they are revalued upward.
Grammar: Countable when talking about one company's reserve: a revaluation reserve, the revaluation reserve. It can also be uncountable in general discussion.
Patterns
- create a revaluation reserve
- transfer to the revaluation reserve
- the revaluation reserve account
The company set up a revaluation reserve after its buildings were revalued.
A gain of $2 million was credited to the revaluation reserve.
The revaluation reserve is shown separately from retained earnings.
nouncountablebusinessfinancetechnical
In some accounting systems, a capital reserve that cannot be paid out as dividends because it comes from unrealized gains.
Grammar: Often used with 'the' when referring to a specific company's reserve.
Patterns
- the revaluation reserve is not distributable
- movements in the revaluation reserve
Because it is a revaluation reserve, the money cannot be distributed to shareholders.
Movements in the revaluation reserve are explained in note 12 to the accounts.
Word forms
| plural | revaluation reserves |
|---|
Common combinations
- create a revaluation reserve
- The directors decided to create a revaluation reserve for the land.
- transfer to the revaluation reserve
- The surplus was transferred to the revaluation reserve.
- the revaluation reserve account
- The auditor checked the revaluation reserve account carefully.
- movements in the revaluation reserve
- The notes explain the movements in the revaluation reserve during the year.
Synonyms and how they differ
- asset revaluation surplus
- A close accounting synonym, often used under international standards; it emphasizes the surplus rather than the reserve itself.
- capital reserve
- A broader term for reserves that are not created from trading profits; a revaluation reserve is one type of capital reserve.
Word family
- revalue verb
- To change the recorded value of an asset or currency.
- revaluation noun
- The act of revaluing something, especially a currency or asset.
Commonly confused: revaluation reserve or retained earnings?
revaluation reserve vs retained earnings
Retained earnings come from accumulated profits and can usually be paid as dividends; a revaluation reserve comes from revaluing assets and normally cannot.
Practice
A company's building is revalued upward by $500,000. Where does the gain usually go?
Choose one answer.
An upward revaluation of a fixed asset is normally credited to the revaluation reserve, which is part of equity. It is not revenue, so it does not go to the income statement; it is not a liability like accounts payable; and it does not itself create an operating cash flow.
Make it your own
Write a sentence using “revaluation reserve”, then check it and compare it with the examples above.