What does IAS 16 stipulate about the depreciation of revalued assets?

The correct choice regarding the depreciation of revalued assets under IAS 16 is that it should be based on the revalued amount minus the residual value. This means that when an asset undergoes revaluation and its carrying amount is adjusted to reflect its fair value, the depreciation is subsequently calculated using this new revalued figure, rather than the original cost.

This approach aligns with the standard's intent to ensure that the financial statements reflect a more accurate representation of the asset's current value over its useful life. By using the revalued amount for calculating depreciation, the carrying amount reflects both the current value of the asset and its expected usage, ensuring that expenses associated with the asset are recognized in a manner that aligns with its revenue-generating potential.

The requirement to base depreciation on the revalued amount minus the residual value also helps to prevent distortions in financial statements that could arise from sticking to an outdated cost figure, thus enhancing the relevance of income reporting. The basis of depreciation should always be updated to reflect significant changes in the asset's value due to revaluation.