What is a Valuation Reserve?
” Valuation reserves are essentially allowances that are created by enacting a charge against earnings. The point of the creation of a valuation reserve is to help a business make use of the company’s assets in the event of come change in the value of the holdings of the corporation. The profits that find their way into this type of reserve fund can be called upon in the event that the original worth of the assets of the company are reduced for some reason. . There are a couple of very good reasons to establish and make use of a valuation reserve. One has to do with the reality of accumulated depreciation.
Valuation reserves are essentially allowances that are created by enacting a charge against earnings. The point of the creation of a valuation reserve is to help a business make use of the company’s assets in the event of come change in the value of the holdings of the corporation. The profits that find their way into this type of reserve fund can be called upon in the event that the original worth of the assets of the company are reduced for some reason. There are a couple of very good reasons to establish and make use of a valuation reserve. One has to do with the reality of accumulated depreciation. Just about every company operates with some assets that will lose value through repeated use, or eventually become obsolete as newer equipment becomes available. Since it is a given that a state of the art piece of equipment will be old news in a few years, making use of the valuation reserve can help to minimize the impact that the incremental depreciation from the original purchase pri
