In order to comply with the principle of recording in the accounting of tangible assets at their fair value, companies may decide to revalue them at regular intervals.
In the case of buildings, the principle of carrying out revaluations at an interval of 3 years is usually observed in order to benefit from a standard share of the building tax.
According to Ordinance of Finance Minister (OMF) 3055/2009, the revaluation of tangible assets is made at the fair value from the balance sheet date.
If, after initial recognition as an asset, the value of a fixed asset is determined based on the revaluation of that asset, the revaluation amount will be attributed to the asset instead of the acquisition / production cost or any other value assigned before the asset. . In such cases, the depreciation rules will apply to the asset in view of its value, determined following the revaluation.
If the result of the revaluation is an increase over the net book value, then it is treated as such:
– as an increase in the revaluation reserve presented under the item “Capital and reserves”, if there was no previous decrease recognized as an expense related to that asset; or
– as an income that offsets the expense with the previously recognized decrease in that asset.
If the result of the revaluation is a decrease in the net carrying amount, it is treated as an expense with the full amount of the impairment, when the revaluation reserve does not include an amount related to that asset (revaluation surplus) or a decrease in the reserve. The revaluation represented within the element “Capital and reserves”, as in the value between the value of the reserve and the value of the decrease, and the event of the difference remaining uncovered is registered as an expense.
According to art.7 and art.24 of Law 571/2003, the fiscal value of depreciable fixed assets and land is represented by the cost of acquisition, production or market value of fixed assets acquired free of charge or constituted as a contribution, at the date of entry into the taxpayer’s patrimony, used for the calculation of the fiscal depreciation, as the case may be. The tax value also includes the accounting revaluations performed according to the law. If revaluations of depreciable fixed assets are carried out, which results in a decrease in their value below the cost of acquisition, production or market value of the fixed assets acquired free of charge or constituted as a contribution, as the case may be, the unamortized tax value of depreciable fixed assets are recalculated to the level established on the basis of the cost of acquisition, production or market value of fixed assets acquired free of charge or constituted as a contribution, as the case may be.
For depreciable fixed assets, depreciation deductions are determined without accounting for depreciation. Gains or losses resulting from the sale or decommissioning of these fixed assets are calculated on the basis of their tax value, less tax depreciation.
Therefore, the conclusion is as follows:
In case of increase in value of a property, plant and equipment through revaluation, the increase in value will be recorded in the revaluation reserves account and will be transferred to the reserves account representing the surplus realized from revaluation reserves as depreciation. This amount will be considered as an element assimilated to income when calculating the profit tax and will be declared in the declaration 101 as such.
In the event of a decrease in the value of an item of property, plant and equipment, assuming that it is the first revaluation or that there is no balance in the Revaluation Reserve account, the decrease will be recorded as a non-deductible expense at the time of revaluation. For this amount, an extra-accounting record will be maintained and it will benefit from its deductibility during the remaining life of the fixed asset. This difference between the accounting depreciation and the fiscal one, will be highlighted in the declaration 101 on the lines afferent to the two categories of expenses.
In case of disposal of the fixed asset either by sale or by scrapping, the amounts remaining in the revaluation reserve will be taxed in full, and the difference between the fiscal depreciation and the remaining accounting will be considered the fully deductible expense.