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Revaluation method is a method of calcuating the depreciation. Sometimes, the value of non-current asset should be revalued according to the market condition for fairness.
When an item of property, plant or equipment is revalued, the entire class of property, plant or equipment to which the asset belongs must be revalued. For example, when a non-current asset has been revalued, the charge of depreciation should be based on the revalued amount and the remaining useful economic life of the asset. Therefore, because of the revaluation the depreciation is higher than previously. And an upward revaluation has resulted in a higher depreciation charge to the income statement.
The prime function of depreciation is to write off the “cost” of an asset over its expected life. If the cost is increased, the depreciation to be charged increases.
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