Hidden reserves

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In accounting, hidden reserves (also: hidden reserves or valuation reserves ) are those components of equity that are not shown in the balance sheet . They can arise from both an undervaluation of assets and an overvaluation of debt .

Hidden reserves are the difference between the objective value and the book value. Hidden reserves reduce the taxable profit and serve to secure the company in the long term, as they can be used in bad times.

The opposite of hidden reserves is hidden burdens . Another opposite term to hidden reserves are open reserves .


While the plural hidden reserves or hidden burdens usually denotes the balance of all over- and undervaluation in a balance sheet, there is also the singular , which denotes the hidden reserve , valuation reserve or hidden burden in a valuation unit , i.e. an individually recognized asset or liability , designated.

Not all operational processes are reflected in the published annual financial statements of a company for the outside observer ( creditors , shareholders / partners , competitors , suppliers , credit institutions , tax authorities ) . This includes hidden reserves as one of the most important off-balance sheet areas. Their emergence can usually be traced back to valuation and / or balance sheet issues. If assets are valued lower than their real value for accounting purposes or debt items are valued correspondingly higher, this is an undervaluation of assets or an overvaluation of liabilities (valuation). If assets that can be recognized in the balance sheet are not shown with an option to capitalize, or if fictitious debts are entered in the balance sheet without permission, this is a question of the balance sheet approach.



Assets on the balance sheet can change their value over time compared to their acquisition / production costs. Then the question arises whether and to what extent these changes in value should be implemented in the balance sheet. The central valuation rule for this is § 253 HGB , in which the lowest value principle is codified. This valuation principle is in turn the core for the creation of hidden reserves.

Hidden reserves can arise through

  • Undervaluation of assets in fixed and current assets : The legal definition of production costs in Section 255, Paragraph 2 of the German Commercial Code grants certain leeway for assessment, because an “appropriate part” of material and manufacturing overheads as well as administrative costs and company pension schemes may be included in the calculation. If this does not happen, this automatically leads to a lower profit or higher loss.
  • Overvaluation of liabilities : If uncertain liabilities are shown in the provisions as higher than it later turns out, this results in a less favorable presentation of the earnings situation . A typical example are litigation provisions, because it can be uncertain whether a litigation will be lost and the amount of compensation that has to be paid.
  • Non-capitalization of assets that can be capitalized : For reasons of economy, the legislature permits low-value assets to be capitalized with a memory value only ( Section 6 (2) EStG) so that hidden reserves are created in the amount of their actual acquisition or production costs.

With the exception of the inadmissible use of fictitious liabilities, all other causes of occurrence are expressly permitted under commercial and tax law in Germany, but are in some cases restricted by law. The legal scope for discretion in the valuation of assets and debts only forms the basis for the creation of hidden reserves, because the actual value development on the balance sheet date is not always decisive for the valuation under commercial law.

In the case of assets, undervaluation means that the cost of acquisition / production is to be used according to the lower of cost or market principle or a lower value on the balance sheet date. Overvaluation of debts means that a higher value can be assumed in case of doubt , especially for uncertain items such as depreciation , provisions and value adjustments .


The formation of hidden reserves takes place through decisions in the company

  • inevitably , in particular due to price fluctuations or changes in the value of money due to inflation / deflation, which may not be taken into account due to the statutory provisions because the nominal value principle applies for tax purposes in Germany ( mandatory reserves )
  • by using express discretionary leeway in valuation regulations ( discretionary reserves );
  • due to estimation errors , in particular in the case of depreciation, value adjustments or provisions ( estimation reserves );
  • on the basis of arbitrary education , in which the legally permitted scope of discretion of “reasonable commercial judgment” is left ( arbitrary reserves ).

Dormant hidden reserves (so-called statutory hidden reserves ) are created through the application and compliance with statutory accounting and valuation regulations. The acquisition or production costs form the upper limit for the valuation of assets (Section 253 (1) HGB). If the replacement costs are higher than these acquisition or production costs, these higher values ​​may not be applied. The strict lowest value principle for current assets and the moderate lowest value principle for fixed assets force companies to choose lower valuations for their assets: with the strict lowest value principle without exception, with the moderate only if the impairment should be permanent.

Hidden discretionary reserves arise from the discretionary scope granted by law to the accounting company to be able to use different valuations based on accounting and valuation options. This includes the option to capitalize derivative intangible assets , the - partially restricted - choice of depreciation methods, the calculation of production costs, the option to retain a lower valuation or the valuation of assets at the permitted lower limit. If activation options are not exercised, hidden reserves are created because the actual assets are higher than the balance sheet shows.

Hidden estimation reserves arise from the imperfect foresight when considering future influences on the valuations (in particular the incorrectly too short estimated useful life when measuring depreciation or the incorrect undervaluation of doubtful accounts ). If the useful life of assets is estimated too short, the depreciation amounts - calculated over the useful life - are too high and the objects are undervalued; Provisions or value adjustments are overestimated and therefore overvalued.

Hidden arbitrary reserves arise from deliberately exceeding the discretion granted under commercial law (such as the arbitrary overvaluation of provisions), the unauthorized non-activation of assets requiring capitalization, the inadmissible passivation of fictitious debts or the legally sanctioned supplementary undervaluation (Section 253 (4) HGB).


Hidden reserves that have arisen usually do not remain permanent, but are dissolved again due to various causes, influencing factors and causes. As an exception, permanent hidden reserves are located in land or investments that are not being sold. As an exception, hidden reserves are uncovered through sale-and-lease-back transactions for tangible and intangible assets. Otherwise, the liquidation takes place either automatically through the operational sales process (when selling undervalued assets or through the passage of time when using depreciated assets), through the deliberate liquidation of overvalued liabilities and the permissible revaluation of undervalued assets or the transition to normal valuation.

In the event of tax evasion , hidden reserves are uncovered and recorded for income tax purposes .


The result of the formation of hidden reserves is that the profit or equity capital appears to be lower or losses higher than it actually corresponds to on the balance sheet date. The influence of hidden reserves on profits affects the dividend policy and therefore also has repercussions on the annual financial statements. The reported profit is problematic as a key figure, because the shareholder and other outsiders cannot see whether and to what extent the annual surplus was actually achieved in this amount or is to be classified as a manipulated variable through the formation or dissolution of hidden reserves. Excessive formation of hidden reserves violates the principles of balance sheet truth and balance sheet clarity , while permissible hidden reserves correspond to the commercial prudence principle and the protection of creditors anchored in commercial law .

With the exception of the above, this is a temporary postponement of profits because the release of these reserves results in a final profit realization; Occasionally, existing operational losses are covered by the deliberate dissolution and not reported.

Recovery orders reduce hidden reserves

The abolition of §§ 154, 155 AktG without replacement in May 2009 shows how changes to the law can also change the entrepreneurial scope for hidden reserves. As part of the Accounting Law Modernization Act (BilMoG), a retention option granted to stock corporations was deleted. Since then, it is no longer possible to use the lower valuation resulting from unscheduled depreciation or value adjustments for fixed assets (Section 154 (2) sentence 2 AktG old version) and current assets (Section 155 paragraph 4 AktG old version) to be retained if the reasons for the unscheduled depreciation or value adjustment no longer exist. In § 253 , para. 5 HGB is now a reverse impairment include, but by forming a Wertaufholungsrücklage the release of attribution profits by a distribution block is prevented ( § 58 para. 2a Act). As a result, the possibilities of creating or maintaining hidden reserves have been restricted.

This requirement to increase balance sheet values ​​compared to the balance sheet approach of the previous year if the reason for earlier depreciation no longer applies is independent of the legal form and therefore applies to sole traders, partnerships, corporations and cooperatives. With the new version of Section 253 (5) of the German Commercial Code (HGB) and the elimination of Section 280 of the German Commercial Code (HGB), the requirement to increase the value already existing for corporations has been extended to all legal forms and the unequal treatment of individual legal forms has been repealed. Only goodwill (Section 253 (5) sentence 2 of the German Commercial Code (HGB)) is excluded from the obligation to increase the value; here there is still a prohibition on reversing the value.

Means of accounting policy

The reason for the discrepancy between actual and proven success is primarily the formation and dissolution of hidden reserves. Existing hidden reserves are available to compensate for economic fluctuations in order to fully or partially compensate for operational losses through dissolution. They therefore contribute to the continuous economic development of companies and support the policy of dividend continuity . If the earnings situation is good, they are created; in the event of losses, their dissolution spares the open reserves that are otherwise intended to cover losses. By realizing hidden reserves, profits can arise that contribute to increasing the open reserves and thus to self-financing or prevent losses from being reported. Finally, hidden reserves can also have a tax deferral effect if they are created at a higher tax level than their release (final tax savings).



The IFRS accounting only fulfills an information function. Protection of creditors and careful calculation of payments are not goals of IFRS accounting. The information function can only be fulfilled if the economic situation of the reporting company is depicted without distortion as far as possible. For this reason, the deliberate creation of hidden reserves is expressly prohibited. Nevertheless, many individual provisions of the IFRS force or enable the creation of hidden reserves. Examples are the lower value principle for inventory valuation (IAS 2), which largely corresponds to the German lowest value principle, or the valuation regulations in IAS 16, IAS 38, IAS 39 and IAS 40, which enable large parts of fixed assets to be accounted for at historical costs (as an alternative to fair- Value accounting) or, in some cases, enforce it. IFRS balance sheets also show hidden reserves, whereby the scope i. d. Usually it should be lower than in HGB balance sheets. The hidden reserves according to IFRS / IAS are largely the result of compliance with the acquisition cost principle .


In Switzerland , all types of hidden reserves are legally compliant and customary. Most Swiss audit firms consider hidden reserves in every form to be important for the accounting policy of private stock corporations , in particular in order to keep the tax burden low.

For listed companies there is an obligation to report at least according to the technical recommendations for accounting . Although these standards still allow the formation of hidden reserves, they stipulate that their net release must be disclosed in the notes. For listing on the main board of the Swiss Exchange , however, accounting according to IAS / IFRS or US-GAAP is mandatory, which means that no hidden intentional reserves may be formed in such companies.

Before the revision of the admission regulations for the Swiss Exchange, it was common practice in Swiss stock corporations to write down all real estate to CHF 1 , for example . As a result, millions of euros were withheld from shareholders in such companies. Today, this practice is only permitted in unlisted stock corporations.

United States

In the Anglo-Saxon world, the hidden reserves are largely unknown; US companies even tend to report excessively high profits. The considerable differences in the size of hidden reserves in HGB balance sheets and US GAAP balance sheets were demonstrated by the listing of Daimler AG shares on the NYSE, with the associated obligation to use US GAAP for accounting. There the equity was suddenly 40% more than according to HGB.

Individual evidence

  1. Heiner Hahn / Klaus Wilkens: Bookkeeping and Balance Sheet, Part B: Balance Sheet , 2000, p. 226.
  2. Heiner Hahn / Klaus Wilkens: Bookkeeping and Balance Sheet, Part B: Balance Sheet , 2000, p. 260.
  3. Heiner Hahn / Klaus Wilkens: Bookkeeping and Balance Sheet, Part B: Balance Sheet , 2000, p. 422.
  4. Karlheinz Küting , Stille Reserven - Kontrovers-Aktuell-Relevant , in: BBK Fach 12, 1999, p. 6311 ff.