Fixed asset revaluation in Latvia: a practical guide for accounting, annual reports and key tax notes

When revaluation is useful

• When the carrying amount of property or other long-lived assets is clearly outdated and materially below their current value.
• When lenders or investors focus on balance-sheet strength and equity ratios.
• When a company owns assets whose value tends to increase (e.g., land, certain real estate) and wants its financial statements to reflect a more accurate position.
• When the company wants to measure an entire class of similar assets consistently instead of maintaining a mix of old and new valuation bases.

Important: choosing the revaluation method typically implies an ongoing commitment to keep the revalued amounts up to date when values change materially.

Latvian legal and regulatory framework

Key requirements come from:

• the Annual Reports and Consolidated Annual Reports Law (rules on revaluing fixed assets and recognising the revaluation reserve in equity);
• Cabinet of Ministers regulations that detail how the law is applied (asset class concept, frequency, depreciation rules, and note disclosures);
• the Accounting Law and related Cabinet regulations on accounting organisation and documentation (evidence, audit trail, supporting documents).

Core conditions: “materially higher” and “expected to be long-lasting”

Latvian rules allow revaluation upward when an asset’s value is materially higher than historical cost (or the previous balance-sheet amount) and the increase is expected to be long-lasting. In practice, that means:

• the difference between the carrying amount and the value at the reporting date should be supported by credible evidence (market data and/or a professional valuation);
• materiality thresholds should be defined in the company’s accounting policy and applied consistently;
• the valuation should reflect more than a short-term fluctuation.

Revaluation method and asset classes: no cherry-picking

If a company chooses the revaluation method, the regulations emphasise consistency within an asset class. The purpose is to avoid selective revaluation and mixed measurement bases inside the same class. An asset class is a group of similar assets used in a similar way (e.g., land, buildings, specific types of equipment):

• Define asset classes in the accounting policy before starting.
• If one building is revalued, assess whether the whole “buildings” class should be revalued.
• Document the class boundaries and apply them consistently across years.

How often to revalue

Revaluation should be performed regularly, depending on how the fair value of the revalued assets changes. If the fair value differs materially from the carrying amount, further revaluation is required. If value changes are minor, revaluation may be done every three to five years, but the company should still reassess annually whether revaluation remains appropriate.

Evidence and valuation reports (with focus on property)

For real estate, the Latvian regulations explicitly mention that the value can be determined by a certified real estate valuer, and the annual report notes should state whether a valuer’s opinion underlies the change. For other assets (e.g., machinery), companies often rely on market price evidence, independent appraisals or well-documented estimates, but the key requirement
remains: the company must be able to show a clear audit trail from source data to the final numbers.

Accounting impact: revaluation reserve, depreciation and reserve reduction

A positive revaluation difference is recognised both in the asset’s carrying amount and in equity as a “revaluation reserve”. However, there is an important exception: if the same asset had previously been written down through profit or loss, the upward revaluation is recognised in profit or loss to the extent it reverses that earlier impairment; only the remaining increase is recognised in the revaluation reserve.

After revaluation, depreciation (when the useful life is finite) is calculated based on the new carrying amount. This typically increases future depreciation expense and affects reported profit, even though the balance sheet becomes more representative of asset values.

Reducing the revaluation reserve is tightly restricted by law: it may be reduced when the asset is disposed of, liquidated, when the basis for the uplift no longer exists, or (optionally) as part of the depreciation process. The reserve cannot be paid out, distributed as dividends or used for loss coverage or other purposes.

What to disclose in the annual report notes

A practical disclosure checklist typically includes:

• the accounting policy on fixed assets and the revaluation method;
• which asset classes were revalued and the revaluation date/period (including gradual revaluation across a year, if applicable);
• for real estate, whether a certified valuer’s report supports the change;
• comparative information: what the balance-sheet amount would have been if the assets had not been revalued;
• movement tables for revalued assets and the revaluation reserve (opening balance, increases, decreases, depreciation, disposals);
• a clear note on the tax treatment where relevant and required by regulations.

Corporate income tax: the practical takeaway

Latvia’s corporate income tax base is primarily driven by profit distribution (dividends and similar payments) and certain deemed distributions. As a result, revaluation itself is typically not a taxable event in isolation. Still, companies should consider:

• revaluation changes accounting depreciation going forward, which affects profit and performance metrics;
• tax outcomes may depend on later transactions (e.g., disposal, related-party transactions, market value considerations);
• annual report regulations require specific tax-related disclosures for revalued assets in some cases, and those disclosures should be aligned with the current corporate income tax framework.

Key terminology (quick definitions)

• Carrying amount: the amount at which an asset is recognised in the balance sheet at the reporting date (after depreciation and any prior write-downs).
• Historical cost: the original acquisition cost or production cost (plus directly attributable costs), before subsequent measurement changes.
• Revaluation amount: the updated measurement basis used when the company applies the revaluation method; it is supported by evidence at the reporting date.
• Revaluation reserve: an equity reserve that captures the net upward revaluation effects after applying the rule on reversing earlier impairments through profit or loss.
• Impairment (write-down): a decrease recognised when the asset’s value is lower than its carrying amount based on evidence available at the reporting date.

These terms matter because Latvian rules link accounting entries and note disclosures to the company’s ability to explain why the value changed, how the change was measured, and how the change affects depreciation and equity in future periods.

Worked example: how the numbers flow through accounting

Assume a company owns a building with the following simplified data at the reporting date:

• Historical cost: EUR 300,000
• Accumulated depreciation: EUR 120,000
• Carrying amount before revaluation: EUR 180,000
• Certified valuer’s estimate of value at the reporting date: EUR 360,000

The uplift is EUR 180,000 (EUR 360,000 - EUR 180,000). If there was no earlier impairment on this building, the uplift is recognised in equity as a revaluation reserve and the building’s carrying amount is updated to EUR 360,000. Depreciation for future periods is then calculated based on the new carrying amount and the remaining useful life.

If the same building had previously been written down in profit or loss (e.g., an earlier impairment of EUR 40,000), the accounting logic changes: the first EUR 40,000 of the uplift is recognised in profit or loss as a reversal of the earlier impairment, and only the remaining EUR 140,000 is recognised in the revaluation reserve.

Practical tip: keep a short “revaluation calculation sheet” in your documentation pack that shows the pre-revaluation carrying amount, the new value, the split between profit or loss and reserve (if applicable), and the updated depreciation schedule.

Depreciation after revaluation: what changes in practice

After revaluation, depreciation is not recalculated retrospectively for past years; instead, the company updates the depreciation basis going forward. In practice, you should:

• Confirm the remaining useful life and residual value assumptions still make sense after revaluation (especially for buildings and major equipment).
• Update the fixed asset register: new carrying amount, revaluation date, and new depreciation charge per period.
• If the company uses components (e.g., building structure vs engineering systems), ensure the revaluation evidence and depreciation basis are consistent at the component level.
• Decide (and document) whether and how a portion of the revaluation reserve is reduced over time as part of the depreciation process, as permitted by Latvian rules.

This is where many implementation issues occur: companies update the asset’s carrying amount but forget to update depreciation schedules, or they update depreciation but fail to explain the policy and calculations in the notes.

When values fall: downward revaluation and impairment logic

The “hard part” is not only recognising an uplift but also handling later periods when values fall. Latvian rules restrict how equity reserves are used, and the reporting logic generally follows this order:

• If a revalued asset decreases in value, the decrease may reduce the revaluation reserve for that asset/class first (to the extent the reserve exists).
• If the decrease exceeds the available reserve, the excess is typically recognised in profit or loss (because equity reserves cannot cover unlimited losses).
• Any later increases should be assessed against earlier decreases: increases may first reverse prior profit-or-loss decreases before creating new reserve.

Practical tip: track the revaluation reserve by asset class (and ideally by asset) in a simple movement table. This makes it much easier to justify how an increase or decrease was treated.

Disposals and the revaluation reserve: what happens when you sell the asset

When a revalued asset is disposed of or liquidated, Latvian rules allow reducing the revaluation reserve in the permitted cases. From an accounting perspective, you should separate two topics:

• Profit on disposal (if any): recognised based on the carrying amount at disposal, which may be higher because of revaluation.
• Reserve reduction: a movement within equity (revaluation reserve decreases). The reserve is not a cash item and is not distributed as dividends.

In practice, companies often document the disposal event, the calculation of carrying amount at disposal date, and the corresponding reduction of the reserve. If you have lenders or investors, be ready to explain that the equity increase from revaluation is “restricted” and does not represent free distributable profit.

Audit-ready documentation pack (recommended structure)

To make revaluation defendable in practice (audit, internal control or lender review), prepare a single “revaluation pack” that contains:

• Decision and approvals: management/board decision, scope (asset classes), reporting date, responsible persons.
• Accounting policy extract: materiality thresholds, accepted evidence sources, frequency of review, and how reserve reductions are handled.
• Evidence: certified valuer report for property (where applicable) and/or market data sources for other assets, with dates and assumptions.
• Calculations: pre/post carrying amounts, impairment reversal split (if relevant), reserve movement, and updated depreciation schedules.
• Journal entries: clearly mapped to the calculation sheet.
• Annual report note draft: method, classes, dates, comparative amounts without revaluation, movement tables, and tax note where required.

If you keep this pack consistent year to year, it reduces the risk of “one-off” revaluations that cannot be defended later.

Common pitfalls (and how to avoid them)

• Cherry-picking: revaluing only the “best” asset instead of the whole class. Avoid by defining classes upfront and applying them consistently.
• Weak evidence: using informal estimates without a clear link to market data or a professional valuation. Avoid by documenting the evidence chain.
• No annual reassessment: treating revaluation as a one-time event. Avoid by introducing an annual review step (even if revaluation is not performed every year).
• Incomplete disclosures: missing comparative amounts, movement tables or method explanations. Avoid by using a standard note template.
• Forgetting depreciation: updated carrying amount but unchanged depreciation schedules. Avoid by updating the fixed asset register immediately after posting entries.

Step-by-step implementation checklist

1. Confirm your fixed asset register is complete and asset classes are defined.
2. Update the accounting policy: materiality thresholds, valuation approach, frequency and
   approval process.
3. Collect evidence and obtain valuation reports (especially for real estate).
4. Document the revaluation date (reporting date or staged revaluation period).
5. Calculate the new carrying amounts and identify any reversal of earlier impairments.
6. Post accounting entries and keep a clear link to calculations.
7. Update depreciation schedules based on the new carrying amounts.
8. Prepare the notes: policy, class details, movement tables, comparative amounts without
   revaluation.
9. Set up an annual review procedure to assess whether further revaluation is needed.

Sources:

• likumi.lv/ta/id/277779
• likumi.lv/ta/id/278844
• likumi.lv/ta/id/324249
• likumi.lv/ta/id/328707
• likumi.lv/ta/id/292700
• vid.gov.lv (UIN BUJ)

Last updated 2026, February 16