Revaluation of fixed assets
Asset revaluation is a procedure for assessment of fixed assets in order to bring their value to real market value (determination of fair value). This is an important lever for managing an enterprise. At the moment, a significant number of Ukrainian companies have revalued their assets, which has allowed them to increase their capitalization several times and develop comprehensive programs for attracting investment resources.
According to the Law on Accounting and Financial Reporting in Ukraine, all joint-stock companies of Ukraine have to transform their financial statements in according to International Financial Reporting Standards (IFRS), and other entities independently determine the advisability of transitioning to IFRS. However, it should be noted here that the fact of accounting in accordance with international standards increases the investment attractiveness of the company.
In accordance with International Accounting Standard 16 “Property, plant and equipment”, non-current assets of the enterprise are subject to valuation. Carrying out this valuation is a prerequisite for reflecting the fair value of these assets as a major component of an enterprise’s business in the process of organizing private placement and IPOs. The need for these works is caused primarily by the following reasons:
- Revaluation of assets helps to increase the equity of the enterprise, which leads to an increase in the business capitalization. The amount of the revaluation of non-current assets refers to the item “Other additional capital” and increases the value of the company’s equity, which indicates an increase in the ability of the enterprise to repayment debt and fulfillment of credit obligations.
- Long-term borrowing programs of the enterprise (bank lending) also provide for the need to bring the value of fixed assets, as the main subject of collateral, to fair value. The difference in book value and fair value causes increased vigilance in the bank and, accordingly, the need to attract additional subjects of collateral.
- The presence of various depreciation schemes (in particular, tax depreciation) leads to the fact that the carrying value of some assets do not reflect the real fair value of the latter, which, in turn, leads to “distortion” of financial and accounting statement and makes it unreliable within the Ukrainian legislation, and even more so within the International Accounting Standards.
- Revaluation of company’s non-current assets will allow to develop more effective depreciation policy at the enterprise, in the end it will help to improve its investment attractiveness.
Specialists of our company performed works on revaluation of assets in accordance with IFRS requirements for a considerable number of companies, including with the application of the asset impairment test (the test for economic depreciation of fixed assets). We have experience in working with large arrays of fixed assets (over 20 thousand assets).
Our valuers have experience of cooperation and coordination of the valuation reports with leading audit companies:
- Ernst & Young
- Baker Tilly Ukraine
- BDO Украина
- Nexia D