When revaluing a capital asset, which model can be used under IFRS?

The correct answer is that under IFRS, the cost model or the revaluation model can be used when revaluing a capital asset.

The cost model allows a company to carry the asset at its original cost less any accumulated depreciation and impairment losses. This approach is straightforward and reflects the acquisition cost over the asset's useful life.

In contrast, the revaluation model allows the carrying amount to be adjusted to fair value at the date of revaluation, less any subsequent accumulated depreciation and impairment. This model provides more relevant information as it reflects the current market value of the asset, which can be particularly useful for investors and other stakeholders in assessing the financial position of the entity.

By providing an option between these two models, IFRS enhances flexibility and enables companies to choose an approach that best reflects the economic reality of their circumstances. This flexibility can be beneficial in industries where asset values fluctuate significantly, allowing companies to provide more accurate and timely information regarding their asset values.