The article “Upward Revaluation of Nonfinancial Assets,” by David Sardone and Tom Tyson, explains that the two most widely recognized sets of accounting standards, namely Generally Accepted Accounting Practice in the US (US GAAP) and International Financial Reporting Standards (IFRS), address the measurement of non-financial assets differently, and compelling arguments exist in favor of each approach. Notes that, despite the challenges to auditing fair value estimates, some suggest that Financial Accounting Standards Board (FASB) should conform more closely to current IFRS procedures by allowing the revaluation of certain non-financial assets. The authors propose that FASB should allow the upward revaluation of fixed assets, such as property, plant, and equipment (PP&E), which have extended economic lives.
The main difference discussed is revaluation of nonfinancial assets compared to fair value. GAAP does not permit revaluation whereas IFRS is in support of revaluation. Also, IFRS permits the reversal of impairment losses from prior periods for all nonfinancial assets besides goodwill. The IFRS standard for accounting for PPE differs from the treatment of available-for-sale investments under GAAP. Some similarities, however, include the fact that initial recognition of an asset is valued at cost. As always, the IFRS approach is a little bit more lenient, as it is more principles-based, and gives companies more freedom to decide how they want to value their assets. The cost model is the only approach allowable under GAAP to value nonfinancial assets, whereas under IFRS, the cost model and the revaluation model can be used. The article shows the criteria for an asset to be considered available-for-sale under U.S. GAAP; with points such as “it must be available for immediate sale in its present condition,” and “the entity is actively trying to locate a buyer” (Sardone