What happens to the carrying amount of an asset once it is revalued under the revaluation model?

When an asset is revalued under the revaluation model, its carrying amount is adjusted to reflect its new fair value. This process involves assessing the asset's current market value and making a corresponding adjustment to its value on the balance sheet.

The revaluation model allows for more accurate representation of an asset's worth, as it can fluctuate over time due to changes in market conditions, usage, or other external factors. If the fair value of an asset increases, the carrying amount is raised, and typically, the increase is recorded in other comprehensive income, not affecting profit and loss immediately. Conversely, if the fair value decreases below its carrying amount, the decrease is usually recognized as an expense in the profit or loss unless there was a previous increase that was recognized in other comprehensive income for that asset.

This revaluation process is essential for companies to ensure their financial statements reflect true and fair values, which can impact decision-making and provide stakeholders with accurate financial information.