revaluation

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Revaluation

An increase in the foreign exchange value of a currency that is pegged to other currencies or gold.

Revaluation

A change to the exchange rate of a pegged currency. For example, if the central bank has declared a currency to be worth 10 U.S. dollars and later changes the exchange rate to $8, one refers to this as a revaluation. A revaluation generally, but does not always, refer to an increase in value.

revaluation

  1. the increase in the valuation of a FIXED ASSET to its current market value. Revaluation of fixed assets such as land and buildings may be necessary to reflect their APPRECIATION as property prices rise. Where revaluation takes place, the increase in the value of the fixed asset over its NET BOOK VALUE is added to the company's RESERVES.
  2. an administered increase in the EXCHANGE RATE of a currency against other currencies under a FIXED EXCHANGE RATE SYSTEM; for example, an increase in the value of the UK pound (£) against the US dollar ($) from one fixed or ‘pegged’ level to a higher level, say, from £1 = $2 to £1 = $3. Governments resort to revaluations as a means of eliminating a BALANCE OF PAYMENTS surplus. The effect of a revaluation is to make imports (in the local currency) cheaper, thereby inducing an increase in import demand, and exports (in the local currency) more expensive, thereby reducing export demand. Contrast DEVALUATION.
Revaluationclick for a larger image
Fig. 171 Revaluation. A revaluation of the pound against the dollar.

revaluation

an administered increase in the value of one CURRENCY against other currencies under a FIXED EXCHANGE-RATE SYSTEM, for example, as in Fig. 171, an increase in the value of the UK pound against the US dollar from one fixed value to another higher value, say, from £1 = $2.40 to £1 = $2.80. The objectives of a revaluation are to assist in the removal of a surplus in a country's BALANCE OF PAYMENTS and the excessive accumulation of INTERNATIONAL RESERVES. A revaluation makes IMPORTS (in the local currency) cheaper and EXPORTS (in the local currency) more expensive, thereby encouraging additional imports and lowering export demand.

How successful a revaluation is in removing a payments surplus depends on the reactions of export and import volumes to the change in relative prices, that is, the PRICE-ELASTICITY OF DEMAND for exports and imports. If these values are low, that is, demand is inelastic, trade volumes will not change very much, and the revaluation may in fact make the surplus larger. On the other hand, if export and import demand is elastic, then the change in trade volumes will operate to remove the surplus. BALANCE-OF-PAYMENTS EQUILIBRIUM will be restored if the sum of export and import elasticities is greater than unity (the MARSHALL-LERNER CONDITION).

Also, whether or not a revaluation ‘works’ in restoring balance-of-payments equilibrium depends on a number of factors, including the reaction of domestic firms and the effect of the government's other policies over the longer term (for example, the control of inflation). For business, a revaluation makes imports more price-competitive, putting pressure on domestic producers either to cut their prices or, alternatively, depend more on advertising and sales promotion. Likewise, in export markets, a firm may choose to hold its prices, accepting lower profit margins rather than increase them in order to maintain market share. Thus, in the short run, revaluations threaten firms’ current profitability and market position, putting firms under pressure to cut costs by improving productivity and generally placing a greater emphasis on PRODUCT DIFFERENTIATION as a means of remaining competitive against overseas suppliers. Contrast DEVALUATION.

See EXTERNAL-INTERNAL BALANCE MODEL.

References in periodicals archive ?
2010 revaluation appeals had been resolved for over 99% of properties for which an appeal had been received - 66,894 of 67,026
However, the two-year antecedent valuation date (AVD) makes no sense for a four-year revaluation and is laughable for a three-yearly review.
Whilst some of the thirty proposals will rightly be subject to further scrutiny, we hope the key recommendations - increasing the frequency of revaluations and matching the English tax rate on higher Rateable Values - will be implemented swiftly by the Scottish Government.
Despite the property revaluation, IPT paid for 2015 and 2016 was still based on the market value of properties as at 1st of January 1980.
Rates generally make up a bigger part of retailers' occupier costs than rent JOHN ADGEY ON RATES REVALUATION IMPLICATIONS
The next section provides a brief background on the accounting for asset revaluations in respect to IFRS and discusses the existing literature.
"If the revaluation had not been postponed then our client would have expected a welcome adjustment to their tax base from April 2015 and beyond.
This hierarchy would reflect the level of reliability of revaluations and enable users to determine which assets can be taken at face value and which must be taken at arm's length.
"Prior to making this request, the Local Government Minister was already clear that he did not wish to hold a revaluation in Wales but was unable to come to a final decision on this because the powers were not devolved."
Deputy Prime Minister and Minister of Finance and Economy, Han Duck-soo, said at the Economic Policy Coordination Meeting on July 22, 2005 that the impact of the Renminbi (RMB) revaluation is expected to be limited.
For now, the 2 percent revaluation of the Chinese currency appears unlikely to have adverse effects on Japanese companies in the form of rises in Chinese product prices.
* The IRS issued final regulations on revaluations of capital accounts and contributions of long-term contracts and proposed regulations on gain deferral on a sale of QSB stock, debt of disregarded entities and special allocations of foreign tax expenditures.