What is a reserve of overestimation?

Reserve for overestimation is a way to charge an increase in the value of the company's assets since the last file of accounts. It is designed to take care of the situation that the total balance of the company has increased, but this increase is not technically profitable. In most cases, the money obtained through the reservation is not distributed to the shareholders. It is usually used for solid assets such as the soil. As and when the company overestimates such an asset, there is a significant increase in the accounts. While most assets lose value over time, the concept covered by depreciation may increase the value. The main example is the soil that tends to become more valuable over time when the supply of unused land decreases in its nature. There may be further drastic increases if the area becomes more attractive to potential users, for example if the freight railway opens near a set of factories.

different countries have different approaches to overestimating assets. For example, accounting laws in the United States of bar companies from overestimating fixed assets to show an increase, even if there is actually an increase in market value. Other countries allow increasing ascending, but require clear data on how the revaluation has been calculated.

Any increase in society's balance caused by revaluation is classified as excess than profit. This means that it does not count on profits and money cannot be divided into dividends shareholders. It can be used as part of a script problem in which the company creates new shares and gives them shareholders to their current share. Accounting has ruled me when the company uses a script problem, has to reduce one or more parts of its balance with the total cost of new shares. Reservation of revaluation is one of the sections that often decreases to finance the problem with the script.

Recent reserve can be used jaKO ongoing account within the company's financial accounts. If the company re -evaluates the asset to reduce its value, some or all money can be deducted from the revaluation reservation. If this is not enough to cover the entire value reduction, the rest of the decline must be stated as a loss to the main profit and loss account. On the other hand, an increase in the value of revaluation may not automatically go to the revaluation reserve; Some or everything can be mentioned as a profit to cover specific losses from previous years.