Revaluation involves reassessing the value of a fixed or financial asset in an organization's accounts to align it with current market conditions. Organizations may perform revaluation to provide an accurate picture of asset values, especially when they are influenced by inflation, depreciation, currency fluctuations, or market dynamics. For example, a company may revalue its office building if the real estate market shows a significant appreciation in property values.

A revaluation is often performed periodically and is vital in ensuring that the company's financial statements reflect current, realistic figures. It may affect depreciation and tax calculations, which in turn impacts the company's profit or loss reporting. For instance, if the market value of a piece of machinery has decreased to a level lower than its book value, the company must revalue and adjust for this drop to avoid overstating assets.

Revaluation doesn't always mean an upward adjustment; assets can also be downgraded for reduced market worth. Accuracy in revaluation ensures compliance with accounting standards and provides greater transparency to shareholders and stakeholders. For example, during the preparation of year-end financial reports, revaluation of certain assets may be necessary to present actual financial standing.