Asset valuation: has your company already complied with the law that is approaching its 20th anniversary?

What the 2007 law requires from companies

It introduced four main requirements:

• Impairment testing;

• Review of the economic useful life of assets;

• Individualized control of fixed assets;

• Adjustment of accounting depreciation.

In practice, this means that every machine, piece of equipment, or property owned by the company must have an accounting value that reflects its actual use and market conditions, not just the amount recorded at the time of purchase.

The most common problem: an asset that exists in the factory but not in the accounting records

It is common to find companies with machinery that is active and operating as part of their daily activities but has no value at all in the accounting records. The machine has been written off in the system but remains on the factory floor generating production.

The impact goes beyond accounting

When these four points are not in order, the problem is not limited to the balance sheet. The company’s results become distorted, the collateral offered for financing is incorrectly measured, and in any M&A transaction, IPO, or due diligence process, this becomes a serious point of friction in the negotiation.

How VBR supports this compliance process

At VBR, asset valuation includes a physical inventory conducted using a proprietary application, reconciliation of the physical asset base with the accounting records, preparation of market value appraisal reports, and review of useful life based on the actual use of each asset. The result is structured information that supports decision making, not just a report delivered at the end of the project.

If your company still has questions about these points and how to comply, contact VBR’s team through the link in our bio or via our institutional website.