Neubewertungsrücklage

Neubewertungsrücklage, translated as "revaluation reserve," is an accounting term used primarily in German accounting law (Handelsgesetzbuch - HGB). It represents a specific type of equity that arises when an asset is revalued upwards. Under HGB, certain assets, such as property, plant, and equipment, can be revalued to their fair value if this value is higher than their carrying amount. Any increase resulting from such a revaluation is not recognized as profit in the income statement but is instead credited to the Neubewertungsrücklage in the equity section of the balance sheet.

The purpose of the Neubewertungsrücklage is to reflect the increased economic value of an asset without immediately impacting the company's profit. This can provide a more accurate picture of the company's financial position. However, when the revalued asset is subsequently sold or derecognized, the corresponding amount in the Neubewertungsrücklage is typically transferred to retained earnings. This recognition of the revaluation gain at the point of disposal avoids the profit being recognized twice. The Neubewertungsrücklage is a distinct component of equity and is not available for distribution to shareholders as dividends until the asset is disposed of or the reserve is specifically released.