Fixed asset appreciation?

[Peter D. Pawelek]

On September 6, 2003 04:08 pm, you wrote:
> Most accountants would probably advise against trying to recognize
> (create an accounting entry) an unrealized gain (no asset sale) and
> increase your asset value.  The principal reason is that you cannot know
> the asset's value until you sell it.  If the asset is a house, and the
> housing market is hot, and your price may temporarily increase by 40%,
> this could be offset by either a market decline or an alternate
> appraisal at a lower value.
>
> Depreciation of assets are allowed by accounting rules and tax laws.
> Appreciation is not recognized (recorded) until realized (transaction
> occurs).
>
> Having read the above, if you still want to record the event, you would
>
> HOUSE                          15,000
>     Unrealized Gain                 15,000
>
> The gain is an income account.
>
> Walt Pennington


Walt,

These are very good points, and it clears up some conflicting advice I've read 
regarding this (i.e., a few books that I have recommend entering the current 
market value of large fixed assets like houses when putting together a 
balance sheet for personal finance purposes).

Having read your response, however, I tend to agree with you (and apparently 
accounting dogma as well) and will leave my house asset at its purchase 
price. As you very well mention, although I'm currently in a hot market, this 
can change quite abruptly over time.

Thanks for the advice.

Peter