Final answer:
Gains and losses under the revaluation method go in the Other Comprehensive Income (OCI) section of the financial statements and are not immediately recognized in the income statement. They are reclassified to the appropriate sections of the financial statements when a specific event occurs.
Step-by-step explanation:
Under the revaluation method, gains and losses are typically recorded in the Other Comprehensive Income (OCI) section of the financial statements. OCI is a separate section of the statement of comprehensive income that includes items that are not part of the regular income statement. It represents gains and losses that are not related to the company's main business operations.
By recording gains and losses in OCI, they are not immediately recognized in the income statement, which focuses on the company's operating performance. Instead, the gains and losses are temporarily held in OCI until a specific event occurs, such as the disposal of the asset.
Once the event occurs, the amounts in OCI are reclassified to the appropriate sections of the financial statements. For example, if an asset is sold, the gain or loss recorded in OCI is transferred to the Income Statement as part of the calculation of net income.