Under the revaluation model (IFRS), if the upward revaluation is reversing a previous downward revaluation, the gain flows through the income statement (to increase net income) and then increases shareholders’ equity. If the upward revaluation is not reversing a previous downward revaluation, the gain flows through the revaluation surplus and increases shareholders’ equity directly.
• In 2015, assets increase along with shareholders’ equity so reported leverage ratios improve (decrease).
• The return on equity also increases as net income and shareholders’ equity both increase. The numerator effect dominates and results in an increase in the ratio.