Historical cost is the original cost of acquiring, constructing or producing an asset and bringing it to the location and condition necessary for it to be used.

Historical cost includes the price of the asset itself, and other costs directly related to it. These may include, for example, transportation, installation or work needed to prepare the asset for use.

Discounts and other reductions in the purchase price reduce the historical cost of the asset.

Historical cost generally forms the basis for the initial carrying amount of an asset.

The revalued amount is the value of an asset after it has been revalued.

When an asset is revalued, it carrying amount is updated based on its value at the measurement date. After the revaluation, this amount becomes the new basis for reporting the asset.

Depreciation and any impairment losses that arise after the revaluation are then deducted from the revalued amount.

The revalued amount may therefore be higher or lower than the carrying amount of the asset before the revaluation.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Fair value is measured using market information whenever possible. The more reliable and readily available the market information, the greater the weight assigned to it in the valuation. The inputs used to measure fair value are classified into three levels:

• Level 1: The measurement is based on quoted prices in active markets for identical assets or liabilities.

• Level 2: The measurement is based on other observable market inputs, such as prices for similar assets or market interest rates.

• Level 3: The measurement is based primarily on valuation techniques and assumptions when sufficient observable market information is not available.

Revaluation is a method used to update the carrying amount of assets so that it better reflects their value at a given time.

When an asset is revalued, its value is reassessed as of a specific date. The valuation may, for example, be based on market information or an expert valuation, depending on the type of asset.

Revaluation may increase or decrease the carrying amount of an asset. The change is recognized in the financial statements in accordance with IPSAS requirements. How the change is recognized depends, among other things, on whether the value of the asset increases or decreases and whether the asset has previously been revalued.

If revaluation is used for a particular class of assets, the same method should generally be applied to all assets within that class. Assets need to be revalued regularly enough to ensure that their carrying amounts do not differ materially from the amounts at which they should be reported under the applicable requirements.

Revaluation therefore helps ensure that the financial statements of public sector entities provide a clearer picture of the value of their assets.