After the liquidation of the company, fixed assets remain with an unfinished shelf life. These tangible assets are subject to an urgent sale at a price well below their market value. This price is called the residual value.
Instructions
Step 1
Determination of the liquidation value of buildings, equipment and other property of the company is required in several cases: when the company is liquidated, the objects of the pledge are sold, the accelerated sale of property for various reasons. In any case, this is a forced sale of objects in a short time, which means that their liquidation value is always less than the market value.
Step 2
One of the key factors influencing the determination of the residual value is the exposure period. This is a time interval, the beginning of which is the moment of placing the object for sale, and the end of which is the moment of the transaction. However, exposure time is not the only calculation criterion. There are two main ways to calculate residual value: direct and indirect.
Step 3
The direct counting method compares an item for sale with a similar item that was previously sold. This method is simple, but not always applicable, since information on liquidated objects is rarely available on the real market.
Step 4
The indirect method of calculating the residual value implies the calculation through the market value. This method is carried out in three steps: determining the market value of the object, calculating the discount for the forced nature of the sale, calculating the residual value. The most difficult stage is the second, because the forced nature of the sale, in turn, depends on several factors:
- exposure period;
- the attractiveness of the object in terms of investment;
- the market value of the object;
- market situation at the time of the forced sale, etc.
Step 5
There are three types of liquidation value: orderly, forced, and value at the destruction of company assets (no sale). An ordered liquidation value is calculated when the exposure period is so long that a reasonable advertising campaign can be carried out and a sale can be made at a price that is more or less attractive to the owner.
Step 6
Forced liquidation value is calculated when assets must be sold as quickly as possible, sometimes in the same day and for practically nothing. This case involves the sale of property and assets to pay off the debts of the enterprise. The residual value in the destruction of assets is calculated when the objects are not sold, but written off, destroyed.
Step 7
Enterprises, as a rule, calculate the residual value of their fixed assets at the end of each reporting period (year). In this case, it is equal to the sum of the residual value of tangible assets and the amount of working capital.
