Revaluation of Fixed Assets On 1 January 2012, Cummins Ltd owned freehold property which cost €960,000, consisting of adjacent land €240,000 and buildings €720,000 - Leaving Cert Accounting - Question 3 - 2017

Importance of Revaluation

Revaluation provides a more accurate reflection of an asset's market value, enhancing the reliability of the financial statements. Here’s why it is crucial:

1. True Asset Value: It allows companies to show fixed assets at their true market value, offering a genuine insight into their financial position.

2. Informed Decision Making: Provides valuable information to stakeholders such as lenders, potential investors, and current shareholders regarding asset values, aiding in their decision-making processes.

3. Accurate Profit Calculations: Ensures that profits are calculated more accurately as it reflects current market conditions, rather than historical cost.

4. Opportunity for Financing: An accurate representation of asset values may support better access to financing options from financial institutions, potentially impacting investment and operational capabilities.

5. Market Dynamics: Reflects overall market trends, ensuring the company adjusts for any gains or losses in its asset valuations.

6. Improved Transparency: Enhances the clarity of financial reporting, thereby building trust with investors and the public.