Instructions for performing an evaluation: How to calculate the value of assets?

Evaluating a company’s assets must be performed rigorously. Public limited companies (SA) should follow the lowest-value method. 

The evaluation of equipment, vehicles, stock or acquisition of holdings is provided for under regulations. Under the provisions of Article 959 CO, the profit and loss account and the balance sheet are to be drawn up “in accordance with generally accepted accounting principles; they must be complete, clear and easy to consult, so that interested parties can inform themselves as precisely as possible of the company’s financial situation”.

Assets shall only be posted at the value they represent for the company at the time of posting.

Public limited companies must use the lowest-value method. They may evaluate their plants, raw materials and securities at maximum cost price or market value, when this value is the lower value. This mostly applies to acquisition fees and manufacturing fees after deducting amortization.

Caution vis-à-vis the balance sheet is, therefore, the main prerequisite. This means not showing the company to be wealthier than it is in reality. If in doubt, the assets and products should be on the lower side, with debts and liabilities on the higher side.

One of the consequences of this method is that companies can only take stock of profits that are made at the actual moment an asset is being sold. This is why public limited companies can only add products at cost price when these products have not been sold.

Last modification 04.05.2021

Top of page