Revaluation of Fixed Assets

The main purpose of revaluation of fixed assets using direct estimate method is to bring into the books the fair market value of fixed assets.

Why does the book value of fixed assets not always correspond to the fair value? It occurs for two reasons:

firstly, erratic behavior of market value of fixed assets;

secondly, index method always used by companies' accountants for revaluation of fixed assets (use of average indices);

Using index method, especcially at times of inflation, leads to misrepresentation of financial indicators and, as a result, to the inaccurate amount of depreciation, taxable base, costs of goods and services.

Using direct estimate method for revaluation of fixed assets and with assistance of highly skilled valuers companies can optimize taxation and depreciation accounting.

Qualitative revaluation of fixed assets enables:

• • to create a more attractive investment climate. Foreign investors first of all are interested in the fair value of fixed assets, and reliable financial statements significantly enhance confidence of foreign investors in Belarusian companies;
• • to get a loan by mortgaging fixed assets;
• • to increase the authorized capital by increasing the nominal value of shares through surplus arising from fixed assets revaluation;
• • restructuring.

Reporting under IFRS, which is also provided now by Belarusian legislation, is one of the forcible arguments to apply the direct estimate method for revaluation of fixed assets.

In 2010 the restrictions on methods for revaluation of fixed assets, objects of uncompleted construction and uninstalled equipment were removed in Belarus (Decree of the President of the Republic of Belarus №512 dated 30.09.2010 and the respective Resolution of the Ministry of Economics, Ministry of Finance and Ministry of Architecture and Construction of the Republic of Belarus №162/131/37 dated 05.11.2010). Thus, Belarusian companies can now independently select methods for revaluation of fixed assets:

• index method – is usually applied by a company’s accounting department, but often it doesn’t reflect the real value of fixed assets;
• direct estimate method – is applied by Valuers’ Collegia as the most effective one in reference to modern companies striving to improve their performance.

How we revalue fixed assets

At first our valuers free of charge carry out preliminary analysis of a company’s fixed assets, which allows us to determine the cost and amount of work to be done. Based on the results of the analysis performed, within 3-5 days we send our commercial proposal to the Client.