Valuation of assets within the scope of preparation of financial statements according to IFRS
Revaluation of assets is not the goal in itself, it is necessary to determine the current value of assets that influences a lot of aspects of activity of a company, namely:
- quality of valuation reflects appropriately the degree of objectivity of bookkeeping and financial statements;
- the amount of value indicator determines the need for capital that is necessary to create assets;
- the amount of asset value influences the amount and level of primary cost and, thus, the price policy of the company;
- the value of assets is the most important indicator that determines the volume of the loan and its property collateral;
- value of assets is the most important indicator in the property insurance;
- value of assets defines the real possibilities of satisfaction of claims of creditors to the company in case of bankruptcy;
- value of assets influences directly a determination of market value of the company that is the most important target indicator in the system of financial management.
Such a significant and versatile influence of value indicator of assets on different aspects of activity of a company explains high interest in the asset valuation from the internal (shareholders, top-managers) and external users (investors, creditors) and causes the need for objective and true identification in the process of revaluation of assets.
As analysis shows, the revaluation of assets influences positively all fields of activity of the company:
- allows to bring accounting in line with National and International Standards of Financial Reporting and to get the true value of assets;
- provides the effective management of size and dynamics of the amortization fund, one of the main sources for the own investments directed at renewing the production funds;
- supports the increase of trust to the accounting policy of the company from the potential investors, creditors and other financial institutions (especially foreign ones);
- allows to get the true amount of net assets per share that is the most important indicator for the joint stock companies that certainly influences the investment attractiveness of the company.
Therefore, one can make a conclusion that in order the management to be effective it is necessary to learn to manage the value of the company as the international practice shows. For this reason it is necessary to determine this value, one part of which is the value of assets, the current value of which is determined by the periodical revaluation of assets.
Within the scope of IFRS projects the professionals of DK are usually engaged in the following cases:
- valuation of non-current assets if IFRS are applied for the first time (IFRS 1);
- valuation of fixed assets if the accounting model choice is according at the revaluation value (IAS 16);
- valuation of assets or other indicators for the accounting of lease contracts (IAS 17);
- valuation of the commercial real estate (IAS 40);
- valuation of assets and liabilities of the company that are within the scope of consolidation for the accounting of M&A transactions;
- valuation of financial assets and liabilities (IAS 32, IAS 39);
- valuation of assets in case of barter transactions (IAS 16, IAS 18);
- for the valuation of net realizable value and value in use in order to determine depreciation of assets and units that generate cash (IAS 36);
- for the valuation of liquidation value of fixed assets (IAS 16);
- for the valuation of fixed assets held for sale (IFRS 5);
- for the valuation of net realizable value of stock (IAS 2).