Asset write-up / write-down
Let's suppose a Company has $100 in its PP&E and a 50% tax rate.
Case 1 - After valuing its PP&E fair price comes to the conclusion that it should write-down $50. As I understand this $50 will reduce EBT (non-operating expense) by $50 and net income by $25. Cash goes up by $25, PP&E goes down by $50 and retained earnings goes down by $25 and it balances.
Case 2 - Write-up of $50. Is it the opposite of case 1? It seems strange that the company is paying more tax just because they revalued its fixed assets?
Does anyone could confirm case 1 and help me on case 2?
If I'm not mistake, one is not allowed to write-up a long-lived asset under US GAAP. However, you can under IFRS and it runs through OCI. So, yes, it would likely just be the reverse of case 1.
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