Dernière modification le 08/08/2022 à 15:01 par Kate Griss
by Erwan COATNOAN DE KERDU
Intangible Capital Value
REVALUATION OF ASSETS
Any company has the possibility, at any time, to revalue certain assets on its balance sheet. When it proceeds to such a revaluation, it is immediately taxable on the capital gains.
The interest in companies: innovative SMEs and start-ups?
Increasing the value of its assets leads to the improvement of the company’s balance sheet. The granting of bank loans, including for start-ups, or the signing of contracts with new customers or partners is de facto facilitated.
For more information, please contact the “Is my company innovative?” section or contact us to validate.
What are the rules?
From an accounting point of view, the revaluation difference only concerns tangible and financial assets. The revaluation of intangible assets differs from country to country, as does the tax impact. It is advisable to validate with a chartered accountant and / or lawyer of the country to remove the doubt and make the right choice.
Be rigorous during the revaluation
The company will have to be particularly rigorous to calculate these revaluations. They will have to be justified according to the usual valuation approaches specific to each asset (e.g. real estate, securities, production lines…), and cannot be determined in an arbitrary way without justification. Let us recall the principle of a fair valuation: the values must correspond to “the amount that a prudent and informed entrepreneur would be willing to pay for it if he had to acquire it, taking into account the usefulness that its possession would have for the achievement of the company’s objectives”.
Each revaluation must be carefully justified and documented. Indeed, the revalued values will be carefully examined by the statutory auditors whose concern is to verify that the values determined are not overvalued. And in case of a tax audit, these values will also be likely to be discussed by the administration.
Taking certain precautions during the revaluation
Several points of attention must be pointed out:
- Valuation in the context of covid-19 is complex, particularly in the implementation of analog methods (decrease in transactions, changes in real estate…),
- Median transaction multiples are at historically high levels, and there is a risk that these multiples will decline in the future,
- The valuation methodology used for the revaluation of tangible and financial assets will serve as a reference in the future for impairment tests. Care must be taken to simulate changes to ensure that there are no likely scenarios that could lead to impairments in the near future.
More generally, it will be important to verify that the revalued value of the shareholders’ equity is not higher than the overall value of the company (for example, by applying the DCF method or the multiples method).
Prior analysis of the scope and cost of this operation
In practice, the revaluation only concerns certain assets; the analysis must be documented for all tangible and financial assets. The issues at stake must be clearly identified (for example, check those certain clauses in bank loan contracts – the covenants – do not exclude revaluation differences).
Finally, it will be necessary to be cautious and to adopt an approach like that used in the context of contributions at fair value.
In this delicate context of a pandemic, given the stakes involved, and as soon as the impact is significant, companies and groups wishing to exercise this option will be well advised to seek the assistance of a valuer.