Revaluation

of commodity and material assets, an adjustment of the monetary valuation by state and cooperative enterprises, economic organizations (excluding kolkhozes), and construction projects, called for by changes in the prices of raw and processed materials, fuel, and finished products, and in the rates for shipping, heat, and electricity.

The revaluation, which is based on inventory data, is made on the date when new prices and rates are introduced. Depending on the difference between the new prices and rates and the old ones, an upward or downward adjustment is made in the monetary valuation of commodity and material assets. Sources of compensation for the total reduction in the valuation and the system for handling the total increase in the valuation are established by the government or by the Ministry of Finance of the USSR on behalf of the government. The total reduction in the valuation, within standard limits, is applied to reduce the statutory capital of an enterprise, organization, or construction project; an increase in the valuation is applied to increase the statutory capital. The standard figure for the organization’s working capital is changed in conformity with this reduction or increase. A reduction in the valuation of stocks credited by the bank is applied to reduce loan indebtedness; an increase in the valuation increases indebtedness. The sums involved in the revaluation of credits are transferred by the State Bank of the USSR (Gosbank) to a special account in the state budget. Compensation for a reduction in valuation for above-norm commodity and material assets not credited by a bank comes from an enterprise’s resources (profit) and in some cases, from the budget. Increases in the valuation of stocks not credited by a bank are transferred to budget income.

Revaluation of commodity and material assets ensures uniformity and comparability in plan and report data and realism in keeping accounts of available working capital, expenditures for the production of output, and the results of the financial and economic activity of enterprises and organizations. These factors are very important for correctly determining profit and rate of profit and identifying reserves for increasing them.

V. V. KUROCHKIN

Revaluation

an official increase in the gold content of a nation’s monetary unit or an actual rise in the unit’s exchange rate. Revaluation is one of the means used in the state-monopolistic regulation of the economy of capitalist nations. In terms of the way it affects an economy, revaluation is the opposite of devaluation. Until the end of the 1960’s, revaluation was a comparatively rare phenomenon in international monetary practices. This is because a nation that revalues its currency is put in a less advantageous position in comparison with other nations in terms of foreign trade, the influx of foreign capital, and international tourism.

By raising the exchange rate of a given country’s currency vis-à-vis the currencies of other nations, revaluation causes a rise in the prices of exported commodities purchased in a foreign currency; it thereby reduces a nation’s competitiveness on the world market and impedes the exports of its goods. By reducing the prices of imported commodities as expressed in the national currency, revaluation leads to an increased demand for imported commodities and a rise in imports.

The exchange rates that develop between the revalued currency of a given nation and other currencies make it disadvantageous for foreign owners to invest capital in the nation that has revalued its currency, since in exchanging currencies the foreign owner receives a smaller total in the local currency. Conversely, for the nation that has revalued its currency the export of capital becomes more advantageous, since it becomes possible to purchase foreign currency more cheaply.

In international tourism, revaluation leads to a decline in income from foreign tourists, since travel to the nation that has revalued its currency costs more. Conversely, it encourages travel abroad by residents of the country whose currency has been revalued, since foreign currencies become cheaper for them.

The governments of the capitalist nations use revaluation to combat inflation. It was precisely as an anti-inflation measure that revaluation was carried out by the Federal Republic of Germany in 1969 and 1971 and by the Netherlands, Switzerland, Austria, and a number of other nations in 1971 and 1973. By restricting the amount of foreign and largely speculative capital that investors put into a nation in hopes of a more profitable investment, revaluation makes it possible to restrain somewhat the increase in the total amount of money in circulation, thus slowing down the rise in domestic prices. The reduction in expenditures on imports that results from revaluation also restricts the rise in domestic prices.

Revaluation is also carried out to retard the growth of a favorable balance of trade. Such revaluation is at times brought about as a result of pressure applied by other nations or international monetary and financial organizations. Thus, in December 1971, the Japanese government, under pressure from the United States, revalued the yen to achieve a more equal balance of trade between the two countries.

In the early 1970’s, a number of capitalist countries made a transition to floating or fluctuating exchange rates, which deviate from the established parity according to supply and demand. Certain capitalist nations thus resorted to de facto revaluations of their currencies by raising the market rate of currencies without officially altering the gold content. Thus, the introduction in February 1973 of a floating rate for the Japanese yen meant a de facto revaluation of the yen by 16.25 percent in relation to the US dollar.

O. M. SHELKOV

revaluation

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

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.
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.

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.

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Synonyms for revaluation

noun a new appraisal or evaluation

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