I belong to a local Temple and one of the accounting issues that has been raised is can the Temple revalue or appraise its assets to book them at Fair Market Value. Currently the assets are at Cost and we do not depreciate. We are a not-for-profit Corporation. As an example, the Temple's Land and Buildings at cost on the Books is around $350,000 but the Market Value would probably be around $1,000,000. So can we make an accounting entry to "up" the asset to $1,000,000 on the accounting books?
That wasn't really very helpful. "Book value" means "whatever value is recorded in the books", which varies depending on the nature of the asset. Assets are recorded at cost at the time of acquisition, as you say, but the book value may change subsequently. Inventory is valued at "lower of cost and net realizable value" for example, land at cost, buildings and equipment at depreciated cost, foreign-currency monetary assets at the current exchange rate.
Land and depreciable assets are generally not recorded at FMV because FMV changes according to economic and other factors and cannot be measured accurately or objectively except by actually buying or selling the asset. To answer the original question, it is highly unlikely that there is a justifiable reason to restate your building at FMV. If you want to pursue the issue, consult a competent professional accountant with experience of your type of operation - probably your auditor.
Depreciation is an attempt to spread the cost of a capital asset over its estimated actual or economic life, in effect attempting to match "pieces" of the cost to revenues generated by using the asset in each fiscal period. It is distinctly NOT an attempt to reflect FMV (or anything like "actual" or "real" or "accurate" value). Land is generally presumed to have an effectively infinite useful life (extending, at least, well beyond any reasonable guess as to the lifetime of the current owner) and is therefore not depreciated; I suppose there might be exceptions such as the use of land as a toxic dump site, but I don't have any experience with such circumstances.
There might be circumstances in which it would be appropriate NOT to depreciate a building. I won't hypothesize, but perhaps this would be more likely for a not-for-profit organization than for a typical business. This would be a decision for your public accountant.
"Value" should be used very cautiously by accountants. In particular, phrases such as "real value" and "actual value" should probably never be used in an accounting context.
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here.
All logos and trade names are the property of their respective owners.