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Financial Reporting Assessment and its Benefits for a Company

Posted by
Valentin Enache

If you're an entrepreneur you've certainly heard around you talking about fair value.

How does Financial Reporting relate to fair value? How does such a report help you make the right decisions for your company?

There are only two questions whose answers you will find in this article.

As specified by Financial Reporting Standards, fair value is a type of value that represents the price that would be received for the sale of an asset or paid for the transfer of a liability in a regulated transaction between market participants at the measurement date.

In order to comply with different financial reporting standards, companies may be required to have an independent and objective estimate of the fair value of their assets and liabilities, prepared by an authorized valuer. Given the fact that the purpose of the valuation is in an interconditioning relationship with the type of value - the former will always determine the type of value, we can list the main purposes, benefits and their applicability further:

- Estimating the fair value of an asset or a liability for recording in accounting records, by types and classes of tangible or intangible assets, or estimating the amount of participations held by a company in the capital of other companies;

- Allocation of the purchase price of an asset or enterprise: identification of the level of goodwill attached to a transaction (the difference between the purchase price paid for the transfer of the enterprise and the fair value of the net identifiable assets acquired);

- Testing the impairment of goodwill, tangible assets and intangible assets (to determine if there is any indication that the asset could be impaired);

- Classification of leases: inclusion in the lessor's financial statements as either operating leases or financial leases.

  In estimating fair value, a valuer will take into account several elements and aspects: the type of unit of account (an individual asset or a group of assets), the type of input data (which will determine the fair value hierarchy), the way in which the asset is used or classified by the reporting entity, whether the assets are recorded or are to be recorded in the accounting records, the measurement date, the selective measurement of part or all of the asset class, the breakdown of the fair value allocation process, the material assumptions agreed by the measurement terms of reference, etc.  

  If you want to have an update of the accounting records or you find yourself in one of the situations described above, use our valuation services with confidence.

  FairValue has a strong team of experts in accounting, finance, fixed assets, and intellectual property. The over 70 evaluators across the country, who make up the #fairvalueteam, are ready to respond promptly to any valuation request in the field of financial reporting, regardless of its complexity and the location of the assets in Romania.

   You can call with confidence, we guarantee for their professionalism.

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