The valuation rules for subsequent valuation distinguish between scheduled and unscheduled depreciation. In some circumstances, a write-down may also be necessary. In addition, a distinction must be made here as to whether an asset of the fixed or current assets is present. In the case of fixed assets, the attenuated lowest value principle applies, which has specific valuation rules for permanent and temporary impairments for subsequent valuation. In the case of working capital, on the other hand, the strict lowest value principle applies, which does not provide for such a distinction. In addition, after an unscheduled depreciation, one must always pay attention to whether an impairment at fair value is subsequently necessary. Only in the case of goodwill acquired in return for payment, this is excluded.

General valuation rules for follow-up valuation – Introduction

When you create a trade balance, you need to know exactly what valuation you are making. On the one hand, assets can be added to the balance sheet. This is called an access. Accordingly, an assessment of this access must also be made. There are specific assessment rules for this access assessment. A distinction is made between purchased and self-produced assets. Accordingly, there are valuation rules on acquisition and production costs.

After having included an asset in the balance sheet in accordance with the regulations for access assessment, one must also consider the subsequent performance. Changes in value resulting from this are now subject to the valuation rules for subsequent valuation. We now want to look at these provisions on the continued acquisition or production costs in detail.

2. valuation rules for subsequent valuation: investment vs. Current assets

One aspect that is of enormous importance in the valuation rules for subsequent valuation is the distinction between fixed assets and working capital. Therefore, we would like to start by explaining the difference between fixed assets and working capital.

2.1 Fixed assets

The exact definition of fixed assets can be found in § 247 paragraph 2 HGB. It states that assets that serve the business permanently are part of the fixed assets. Conversely, it follows that all other goods intended to serve the company only temporarily are included in the working capital.

In order to illustrate this difference between fixed assets and working capital, a few accompanying sentences are allowed. The fixed assets include in particular real estate, plants and machinery as well as vehicles of the vehicle fleet. In addition to these tangible assets, there are also financial assets and intangible assets, which also belong to the fixed assets.

2.2 Current assets

In contrast, current assets contain goods that are only of short-term benefit to a company. In particular, this includes the stocks which the company consumes in the production of goods. These include raw materials, auxiliary materials and consumables as well as advance payments made on them. But also the unfinished or finished goods belong to the working capital. After all, it is the goal of the company to sell these profitable ones as soon as possible. With this keyword, one should also immediately think of liquid funds, i.e. in particular bank and cash balances. They also count as working capital as any claims on customers. In addition, company shareholdings are also allocated to working capital. But even financial assets, if you want to use them only in the short term, such as shares, can belong to the current assets. Finally, all other assets that can not be assigned to any of the mentioned categories (for example Bitcoins) are also included in the current assets.

2.3 Breakdown of fixed and working capital in the balance sheet

Where there are categories, there is also a certain order. In addition to the valuation regulations for subsequent valuation, which are in the foreground here, reference is then also made to the structure of a trade balance sheet prescribed in § 266 HGB. Here we present the items for investment and working capital shortened and simplified in the legal structure:

Fixed assets

I. Intangible assets