From Accounting Regulations To Valuation Practice

The Appraisers Role In Tangible Assets Revaluation

Critique Paper

Property, Plant and Equipment, according to IAS 16, are tangible assets that are
held for use in production or supply of goods or services, for rental to others, or for
administrative purposes, and are expected to be used during more than one period.
This type of asset is initially recognized at cost, including capital expenditures. After
recognition, the entity could either choose to use cost model or revaluation model. In
cost model, items under this asset are recorded at cost less any accumulated
depreciation and any accumulated impairment loss. On the other hand, revaluation
model reports such items at its latest fair value less any subsequent accumulated
depreciation and subsequent accumulated impairment losses or at its revalued amount.
Usually, professional appraisers determine the fair value used in revaluation.
In relation to the Conceptual Framework for Financial Reporting, the revaluation
of Property, Plant and Equipment is subject to the fundamental qualitative
characteristics of the said framework. One of the characteristics is having relevance, in
which the changes in the amounts would definitely affect the face of the financial
statements, financial ratios and as net effect, the decisions of financial statement users.
Another characteristic is being faithfully represented, in which the revaluation should be
properly done and accounted for.
The article tackles about the importance for professional appraisers to also have
knowledge in accounting for reliable measurement. The study investigated between
accounting and valuation and the interest and content of literature reviews regarding
qualitative and quantitative analysis. The research process involves content analysis,
comparative analysis and critical analysis, in which they used to study the meaning of
the documents, to focus on similarities and differences between standards of

accounting and valuation and to highlight the difficulty in comparing both, respectively.
As discussed earlier, one of the subsequent measurement models is the revaluation
model. As observed by the author, the articles showed benefits of using the model.
Though the management could do its own valuation, it could most probably be
questioned; therefore, the expert valuators normally give the fair value. One of the
studies reviewed by the author also showed that independent revaluations are more
reliable than revaluations made by the entity. However, as the main article emphasizes,
lack of accounting knowledge could affect faithful representation of the financial
statements and may cause problems when auditing. So, it laid connection between
accounting standards and the standards required by the government for professional
appraisers. The author concluded that for the revaluations made by experts to be
reliable, is should not only follow their standards in valuation but also consider the
accounting standards related to it.
Standards implemented for professional appraisers were not tackled in class.
However, the application of accounting issues and standards in reporting that were
stated were the same as in class. Such issues were recognition of asset, revaluation of
the entire class of asset, capitalization of initial and subsequent expenses, computation
of book values and depreciation, impairment, fully depreciated assets and nondepreciable land. Also, one of the sources of revalued amount allows the purchase price
of the asset less observable depreciation if fair value is not available. We do not
practice the use of managements own valuation of assets because its reliability could
be questioned. Under the Philippine Law, the Professional Regulation Commission uses
Republic Act No. 9694 or Real Estate Service Act of the Philippines as basis of the

stipulations regarding revaluation of assets. Therefore there are different comparisons

of standards that are to be observed and by the professional appraisers, in addition to
the said republic act, which probably is different from the article, to come up with a
reliable measurement that is also acceptable by the local standards in auditing.
The use of revaluation model may have benefits, however if there is no active
market or the item is rarely sold in the market, the use of cost model is more
practicable. Also both the models are accepted by the standards and depreciation and
recording of the values is much easier and understandable than the other model,
especially if the appraisal values are also questionable.
The article focused on the ability of the appraisers to come up with values that
are in accordance with their standards and also the accounting standards for it will
greatly affect financial statements and most especially the decisions of its users,
including the owners, investors, and government agencies.

Reference:
Adina, C. (2012). From accounting regulations to valuation practice the appraisers
role in tangible assets revaluation. Annals Of Faculty Of Economics, 1(2), 648-654.