Evaluation option

This article covers the term from accounting; for the electoral system see assessment choice

In accounting, the right to choose a valuation is understood to be the statutory right granted to the accounting company to choose between two or more values .

General

With regard to the accounting options , the question of whether certain asset or liability items that can be accounted for but are not required to be accounted for should be included in the balance sheet . In the case of valuation options, on the other hand, it is about the question of the value at which an asset included in the balance sheet should be recognized. The final value is the result of the valuation of assets and debts . Most accounting regulations of accounting law must be observed and do not allow any entrepreneurial freedom of action . This includes in particular the accounting principles of balance sheet truth , balance sheet continuity and balance sheet clarity as well as the lowest and highest value principle . Optional provisions, on the other hand, give the balancing party a choice between several values.

Types of suffrage

An entrepreneurial discretion , however, granted the Commercial Code is often mentioned (HGB) principle of sound business judgment . This vague legal term covers both balance sheet items on the assets and liabilities side.

A general distinction is made between method and valuation options:

Method options

The accounting company is free to choose between several valuation and recognized depreciation methods.

• assets
  • Consumption sequence method in the collective valuation method for inventory assets:
    For the acquisition costs for raw materials , consumables and supplies, there is a choice between valuation using the weighted average method on the one hand and the Lifo method on the other. In terms of commercial law , there is also the option of using the FIFO procedure in accordance with Section 256 HGB . A change of the selected consumption sequence method is possible under certain conditions.
  • Production costs : The lower limit of the value is formed by the individual costs , whereas necessary and appropriate material and production overheads and administrative overheads are eligible for capitalization , provided that they relate to the period of production ( Section 255 (2), sentences 3 to 5 HGB). There is therefore a large margin for including overhead costs . The interest expense for borrowed capital that was taken out to finance the production of a balance sheet item may be taken into account in the production costs in accordance with Section 255 (3) sentence 2 HGB. The lower limit is formed by the direct costs (material, production and special direct costs of production).
  • Depreciation method is the way in which the depreciation is determined . The freedom of method leaves the balancing party with the choice and change of the depreciation method under certain conditions. In commercial law, linear , geometric and arithmetic-degressive , progressive ( arithmetic and geometric-progressive ) and performance-based depreciation are permitted. In the tax balance, on the other hand, progressive depreciation is prohibited, while the geometrical-degressive (for movable property, plant and equipment according to Section 7 (2) EStG) and the arithmetic-degressive (for buildings only in decreasing graduated rates according to Section 7 (5) and (5a) EStG) ) are permitted to a limited extent. Under commercial law, the choice of the depreciation method is free, but it must correspond to the GoB and must not conflict with the actual wear and tear and depreciation of the asset. Restrictions result from tax law and limit the scope under commercial law because of the reversed principle of relevance that has been abolished .
  • Fixed valuation in fixed assets : Regularly replaced property, plant and equipment as well as RHB can be recognized with a constant amount and a constant value according to § 240 Abs. 3 HGB.
  • Group valuation of fixed assets: Similar inventory assets and other similar or approximately equivalent movable assets can each be combined into a group and assessed with the weighted average value (Section 240 (4) HGB).
  • In the consolidated financial statements , according to § 312 1 HGB in the recognition of an "at equity" for the next paragraph. Participation in the consideration of the difference the choice of book value - or equity method possible. Valuation options within the meaning of Section 308, Paragraph 1, Clause 1 of the German Commercial Code (HGB) are also considered to be valuation latitudes under the law of the parent company , which arise from the fact that the calculation parameters within a valuation method are uncertain and the value must be estimated.
• liabilities
  • Pension provisions : According to Section 253, Paragraph 2, Clause 2 of the German Commercial Code (HGB), provisions for retirement benefit obligations or comparable long-term obligations may be discounted at a flat rate using the average market interest rate based on an assumed residual term of 15 years. The valuation of the pension provision can be influenced by freely deciding on the amount of the discount rate.
  • Expense provisions : Valuation options can be used primarily for provisions for which there is an option to passivate . In the case of provisions for expenses, there is a choice of valuation according to the scope, because an amount "between" zero "(no passivation) and the value (full passivation) based on reasonable business judgment” is permissible. However, they must be made up for at the latest 3 months after a balance sheet date ( Section 249 (1) No. 1 HGB).

Valuation options

In expressly stated cases, commercial law allows the choice between two or more legally permissible values. Valuation options can be subdivided into devaluation and revaluation options.

• Devaluation options require a non-permanent reduction in value . They allow an asset to be valued at a lower value than the amortized acquisition or production costs or due to mandatory unscheduled depreciation. They lead to hidden reserves .
  • In financial assets an impairment loss is at temporary impairment not mandatory (§ 253 para. 3 sentence 6 HGB). It is assumed that the impairment will be compensated for in the future by an opposing reversal in value.
  • Low-value assets may be written off in full in the year of their acquisition ( Section 6 (2) EStG).
• Revaluation options relate to reversals of the value of assets and lead to the release of hidden reserves. The write-up is because of the strict realization principle material on the repeal of previous write-downs limited (reversal). Since the BilMoG in May 2009 created a requirement to increase the value of fixed and current assets for all legal forms ( Section 253, Paragraph 5, Clause 1 of the German Commercial Code), there are no longer any upgrading options in this area. This requirement under commercial law is covered under tax law by Section 6 (1) No. 2 EStG .
  • Revaluation reserve: According to Section 253, Paragraph 5, Clause 1 of the German Commercial Code (HGB), price or share price increases that have occurred since the last book value may not be taken into account in the form of write-ups, whereas under IAS ( Available for Sale ) there is the possibility of a revaluation reserve. According to Art. 7 Para. 1 of Directive 2013/34 / EU (Balance Sheet Directive) of June 2013, the EU member states are permitted to enact national regulations to allow all companies to value fixed assets at revaluation amounts, whereby the difference between the valuation must be added to the revaluation reserve in the balance sheet as equity capital at the cost of acquisition or production and the valuation on the basis of revaluation ; a distribution block applies to this (Art. 7 Para. 2). Since the HGB still lacks these regulations on revaluation due to a violation of the lower of cost or market principle , the use of revaluation reserves is only possible for those German companies that act as securities issuers on an organized capital market . According to the IAS regulation of July 2002, they are obliged to apply the IAS (now: IFRS = International Financial Reporting Standards ) in their consolidated financial statements since 2005 . To this end, Section 315a of the HGB regulates which HGB provisions are to be applied accordingly for these companies.
  • Approval of the increased partial value : If the partial value of fixed or current assets is lower due to an expected permanent decrease in value, this can be applied (Section 6 (1) No. 2 Sentence 3 EStG), but the increased partial value can also be applied accordingly become.

meaning

Depending on the valuation, various balance sheet indicators such as equity ratio or investment intensity change . Valuation options also have an impact on net income and thus influence cash flow and profitability . The exercise of valuation options can be used for the purposes of asset maintenance and financing.

Although the BilMoG abolished a large number of valuation options in May 2009, there is still considerable room for maneuver for accounting companies. Not only German commercial law, but also international accounting standards such as IAS and US-GAAP recognize valuation options which, together with the accounting options, contribute to the limited informational value of annual financial statements. They are used by companies in particular to pursue material accounting policy .

Individual evidence

1. ↑ Wolfgang Hilke, Bilanzpolitik , 1991, p. 107
2. ↑ Michael Bitz / Dieter Schneeloch / Wilfried Wittstock, The annual accounts: National and international legal provisions , 2011, p. 714
3. ↑ Michaela Lembke, accounting policy in the individual financial statements , 2007, p. 27
4. ↑ Benjamin R. Auer / Luise Hölscher, Basic Accounting Course , 2008, p. 262 f.
5. ↑ Wolfgang Hilke, Bilanzpolitik , 1991, p. 185
6. ↑ Hans Adler / Walther Düring / Kurt Schmaltz, Commentary on the HGB , 1989, § 253 HGB, Item 164
7. ↑ Wolfram Scheffler, Taxation of Companies II , 2014, p. 220
8. ↑ Directive 2013/34 / EU of June 26, 2013, OJ. L 182/19
9. ↑ Regulation (EC) No. 1606/2002 of July 19, 2002 on international accounting standards, ABl. EG No. L 243 p. 1