Definition of Valuation Reserve

It is a reserve account that records the surplus created when assets are revalued.

Explanation of Valuation Reserve

Furthermore, it is a special account set up to offset changes in one or more accounts, for example, accumulated depreciation from depreciable fixed assets or dividends payable. When a bank believes a loan is uncollectible, it sets aside a portion of earnings equal in value to the estimated difference between the loan and the market value of the bad loan in the special account.