Listen to a Business English Dialogue About Reevaluation surplus
Hannah: Hi Paisley, have you ever heard of reevaluation surplus?
Paisley: Yes, I have. Reevaluation surplus refers to the increase in the value of assets, such as property or equipment, over their historical cost.
Hannah: That’s right. Reevaluation surplus occurs when the market value of assets exceeds their book value, and it’s recorded as a separate component of shareholders’ equity.
Paisley: How does reevaluation surplus impact financial statements?
Hannah: Reevaluation surplus can lead to an increase in shareholders’ equity on the balance sheet, reflecting the higher value of assets.
Paisley: Can reevaluation surplus affect a company’s financial performance?
Hannah: Yes, it can. Companies with reevaluation surplus may appear more financially stable and attractive to investors due to their higher reported equity.
Paisley: Are there any drawbacks to reevaluation surplus?
Hannah: One potential drawback is that reevaluation surplus is subject to market fluctuations, which can impact financial statements and investor perceptions.
Paisley: How do companies calculate reevaluation surplus?
Hannah: Reevaluation surplus is typically calculated by subtracting the historical cost of assets from their current market value.
Paisley: Thank you for explaining, Hannah.
Hannah: You’re welcome, Paisley. Reevaluation surplus is an important concept for understanding the financial health and stability of a company.