Revaluation reserve meaning

In practice, a revaluation reserve records unrealised upward revaluations of property, plant and equipment measured at fair value. It is an accounting/equity reserve (not a statutory term) whose legal significance lies in company law rules on distributions. Key features: - Recognised in equity outside profit or loss (other comprehensive income). It offsets subsequent downward revaluations/impairments of the same asset but not of different assets, and is transferred to retained earnings when the relevant asset is disposed of. - It is a non‑distributable reserve: it does not constitute realised profits and cannot fund dividends. - Under IFRS (IAS 16/IAS 40) and FRS 102, investment property fair value movements are taken to profit or loss, so no revaluation reserve arises automatically. Many UK and Irish companies nonetheless make a reserve transfer to a non‑distributable revaluation reserve to ring‑fence such unrealised gains and avoid accidental distribution. Corporate actions: - May be capitalised for a bonus issue of shares. - It does not create distributable profits for a purchase of own shares; a private company may still undertake a buy‑back out of capital if the statutory procedure is followed. - It is not a distributable source for a capital reduction, although it can be capitalised into...