Which corresponds to the definition of liquidation value. Calculating the value of an accounting asset. Calculation of liquidation value in crisis conditions

Liquidation value is the value of all assets that can be sold in the event of bankruptcy of the enterprise.

The sale of assets is carried out in order to repay, in whole or in part, all obligations to creditors.

Usually, possible bankruptcy becomes known long before this decision is made and all necessary procedures begin, so entrepreneurs manage to sell part of their assets at more favorable prices and pay off part of the obligations.

Estimation of liquidation value

Cost calculation formula No. 1

There are two ways to calculate liquidation value. In the case when the enterprise ceases to make a profit and in the case when it continues to make a profit.

The formula for calculating liquidation value is quite simple:

(Price/earnings) or as it is usually written in textbooks (P/E).

For calculations, data is taken for the quarter of operation of the enterprise and this data must be reliable. In some cases, additional correction factors are introduced. It should be borne in mind that the exact liquidation value can only be found out after the company is declared bankrupt and its property goes under the hammer.

That is, you calculate the likely amount that you could receive if assets were sold at a certain point in time.

Therefore, the following formula is usually used to calculate liquidation value:

Sp = R f × (1 – K p) × (1 – K v).

Where Sp– liquidation value;
Russia– market capitalization, which is expressed in absolute values;
Kv And KP– increasing and decreasing assets, respectively, both depend on the situation and the time required for the reorganization or liquidation of the enterprise.

Formula for calculating cost No. 2

The second method of calculating liquidation value implies that the company continues to make a profit and therefore when calculating this fact must be taken into account. In this case, the amount of debt obligations is determined, since without this it is impossible to determine the real value of assets.

The liquidation value in this case is determined quite simply: We subtract the company's debt from the total value of the property. In this case, when calculating the liquidation value, auxiliary coefficients are not used, but interest rates on loans must be taken into account.

To calculate the accumulated debt, use the formula for calculating interest:

FV=P(1+n)k– for a complex bet;

FV=P(1+nk)– for simple;

Where F.V.– the amount of debt with interest;
n– interest rate;
k– period;
P– amount of accounts payable.

When determining accounts payable, debts paid should also be taken into account. If there is an overdue debt, it should be included in the final amount along with penalties and fines.

When should balance sheet information be clarified and adjusted?

The process of liquidating a company takes a long time. As a result, based on the procedures performed, a liquidation balance sheet is compiled.

The purpose of the liquidation balance sheet is:

1. Show incurred by the enterprise losses during liquidation or reorganization
2. Securing creditors and related government bodies reliable information about economic condition companies.

As a rule, before the final liquidation balance sheet, interim balance sheets are first submitted. In them, data on the state of liabilities and assets is adjusted throughout the entire period while the liquidation of the enterprise lasts.

Before the liquidation balance is submitted to tax office, it is necessary to make appropriate entries and adjustments.

You will need to indicate:

1. All costs and losses losses incurred during the liquidation of property;
2. Revenue received from the sale of assets;
3. Information is recorded in the balance sheet about the financial condition of the enterprise, its property and liabilities at the time of liquidation of the balance sheet.

Then the balance is approved by the founders or participants of the competition board. After the decision to liquidate the enterprise is finally received, that is, the enterprise will be removed from the state register of legal entities, the final balance sheet is submitted to the tax office.

The main essence of the concept

The essence of the liquidation value of assets is that that these assets are the collateral of the enterprise. It takes out a bank loan against these assets and, in the event of bankruptcy, pays off all its obligations with the same property. That is, if an enterprise does not make a profit and is on the verge of bankruptcy, then its assets automatically turn into liabilities.

It is important to consider that banks usually issue loans based on liquidation value, and the liquidation value is calculated based on the market value. This is due to the fact that when assets are sold in the event of bankruptcy, their price will be significantly lower than their original cost.

Since in this case the assets will be sold under the hammer, often hastily and with large losses. Therefore, lenders are looking for insurance.

Economic definition of the concept

The economic definition of the concept is that salvage value acquires its significance when there is a need to sell the property of an enterprise in a short time. But it is not always associated with the bankruptcy of the enterprise.

Very often this concept also refers to the sale of obsolete or unnecessary equipment. The proceeds are used to pay off obligations to creditors. The remainder can be used to pay dividends or invested in other assets.

In the global economy, the concept of “liquidation value” has a clear connection with the probability of bankruptcy.

The essence of this approach is simple: in any case, sooner or later, the company will be declared bankrupt and all property will be sold off. There are two approaches to the sale of assets in this case: urgent liquidation and orderly liquidation.

A quick liquidation occurs when creditors demand immediate repayment of all obligations. The reasons for such claims may vary, but it is common that in such cases the assets are sold at a reduced value. Sales and auctions are organized.

An orderly liquidation occurs within a reasonable time frame. In this case, the liquidation value can be as close as possible to the market value.

Typically, such liquidation occurs in two cases:

1. After paying off all debts;
2. In cases where probable bankruptcy becomes known in advance, before the commencement of the liquidation procedure of the enterprise.

Accounting assets and liabilities

As you know, all transactions, including the sale of property at liquidation value, must be documented in the financial statements of the enterprise. All funds of the enterprise are divided into assets, that is, on property and liabilities - the sources of formation of this property.

Due to the fact that the capital structure does not depend on decisions taken regarding investment policy, the organization cannot change the market value of its assets. Their value does not depend on the state of the enterprise's liabilities.

Therefore, when identifying liquidation value, economists often pay more attention to balance sheet assets. After all, it is through them that obligations to creditors will be repaid.

Western approaches to identifying liquidation value

IN Western countries The approach to identifying liquidation value differs significantly from the Russian one. This difference, ultimately, determines the entire policy of Western entrepreneurs regarding the identification of the liquidation value of an enterprise.

It is believed that after the sale of assets and the repayment of all existing liabilities, the property ceases to be valued at liquidation value, and begins to be valued at market value. The remainder of the property is sold, and the funds received are distributed among shareholders.

Liquidation value is the maximum possible value at which, in the event of quick liquidation, the company can be sold. Since sales will always take place in a short time, the price will therefore always be lower than the nominal price. There are options when a company is sold at a lower price, but this should be considered as a shortcoming in the management system.

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In what cases does liquidation value arise?

Various circumstances and the structure of the company directly influence this; the size of the liquidation value must be known in the event of bankruptcy of the organization or during an emergency sale. The procedure for determining the liquidation value is carried out by private experts or specialized companies.

An important point in the emergence of liquidation value is the presence of unforeseen circumstances that affect the organization or the market.

Liquidation value is not only determined in the event of bankruptcy, it can also be used as a precautionary measure.

1. Liquidation value arises in a situation with the sale of collateral. As a rule, the lender needs to know the size of the liquidation value, since through it he will be able to justify the lowest possible threshold for the value of the collateral. Here, the collateral is a guarantee of the lender, which will always be possible to realize. The value in question is considered liquidation value because it has all the characteristics characteristic of it - limited time for sale and forced sale of assets.
2. Liquidation of an organization. With this development of events, the period during which assets must be sold is determined by strict boundaries. Moreover, it is necessary to develop a strict action plan, the priority goal of which is the sale of the company's assets and the fulfillment of debt obligations. The timing of the sale of assets during bankruptcy proceedings varies, it largely depends on the situation and conditions in which the company is located. An important point is what version of the liquidation decision was made– voluntary or forced. If the liquidation is voluntary, then the possibility of selling the company's assets and the timing of its sale do not have a very strict framework. In the forced liquidation option, the time for selling assets is strictly regulated.
3. Accelerated sale of other assets. Since the time for the sale of the organization’s assets is very short, there is a corresponding need to establish the liquidation value.

Species

There are 3 types of salvage value.

1. Recycling. With this option, the value of the company will be negative, since the assets of the organization will not be sold, but will be either written off or destroyed. After this, a new company will be built in the “cleared” space, the economic efficiency of which will be better than the previous one. The negative value of an organization is based on the fact that both the write-off and sale of the company’s property will require certain financial costs.
2. Liquidation. The underlying thesis here is that the sale of an organization's assets undoubtedly requires a certain time period in order to obtain the greatest income after their sale.
3. Forced. In this scenario, the organization’s property is sold in shortest time, very often all at once and within one auction.

How to calculate

The most used formula for determining salvage value is:

With liquid = Sryn* (1 – To remove), where:

C liquid – liquidation value of the property;

C market – objective market value (in the presented formula this is the most accurate indicator);

K out – adjustment coefficient, takes into account the fact of forced sale. This coefficient varies from zero to one.

Factors influencing liquidation value

1. Time allotted for implementation the so-called exposure period. The cost of the organization directly depends on the time frame allocated for implementation. It's simple - short terms - low cost. Implementation deadlines are determined taking into account many factors, the determining factors being demand and the type of enterprise.
2. State of the company in general in its market segment and economic conditions in a specific area.
3. Attractiveness level for potential buyers, which directly depends on the level of equipment of the company and the condition of the means of production.
4. Subjective aspects must also be taken into account.

Cases in which an expert assessment is necessary:

1. Bankruptcy or the real possibility of its occurrence.
2. A situation in which the company's income will be less than its sales income. Here we can also talk about moments with sudden changes in market conditions, when the production process becomes too expensive.

It is not necessary that the company, after calculating the liquidation value, will subsequently be sold. This can be considered as a precautionary measure in case of unforeseen circumstances.

Grade

Two methods are used - indirect and direct. The choice of methodology is influenced by the type of organization, but the results will have insignificant differences when calculated using different methods.

1. Comparative analysis the main characteristics of the company is the basis of direct calculation. Initially, the sales volume of the enterprise and its competing companies is analyzed. Next, the main production indicators are subject to assessment and then, based on the results obtained, a conclusion is made about the optimal cost. The disadvantage is that this method does not pay enough attention to implementation deadlines. However, based on its results, one can judge how much the liquidation value is lower than the market average value for a similar organization.
2. Indirect method consists in calculating the liquidation value based on the market price. Initially, the nominal price is calculated, then the discount amount associated with the sales period is calculated separately. The main difficulty in implementing this technique is determining the size of the discount, since it is influenced by several factors, including subjective ones. Based on statistical data, on domestic market in Russia medium size discounts range from 20 to 50 percent. Experts often use the indirect method, since it is necessary to clearly determine the prevailing trends in the market in order to be able to calculate an adequate forced sale price.

What difficulties may arise when assessing liquidation value?

In reality, with stable economic development, production is sold at market value. During a crisis in the economy, the sales process will be influenced by related factors that significantly reduce the cost.

The difficulty is that during a crisis it is very difficult to obtain objective and reliable indicators for calculations. It is for this reason that in situations of economic instability they use an indirect method.

The accuracy of determining the liquidation value directly depends on the professionalism of the appraisers.

Liquidation and market value

Market value is the most realistic price at which property and assets can be sold within a limited period of time. The size of the market value is influenced by many aspects - from infrastructure to the type of object itself. Only a qualified specialist can determine the market price as accurately as possible.

Often, sellers involved in the sale of property indicate prices that differ from the average prices on the market. It is possible that the seller, wanting to reduce the time of sale, sets a price below the market price, then it will already be considered liquidation. That is, we can say that the liquidation value is the price with which the seller will be forced to agree if the timing of the sale is strictly limited and there is an urgent need to sell assets and property.

So, we can say that in modern Russian economic realities, the definition of liquidation value is more than relevant, but, unfortunately, needs to be improved. In many ways, the process of determining value is based on intuitive decisions made by an appraisal expert.

Today, the prevailing crisis has a tangible impact, which forces us to make significant adjustments in the process of determining the liquidation value of assets. It is for this reason that it is most advisable to use all existing methods in the process of calculating liquidation value, since this will allow you to obtain the most accurate and effective result.

Liquidation value - This is an assessment of real estate or assets of an enterprise in monetary form, when sold on the market in a short period of time, with an urgent need to generate revenue.

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This is the amount that the seller has to agree to, since due to the limited time of the transaction, it is not possible to familiarize all potential buyers with the property being sold.

The price for reorganizing an enterprise can be determined from any property owned by the enterprise. To do this, use the balance sheet of the enterprise for the last reporting period. Each section of assets and liabilities is examined in detail, defining assets in use, receivables and payables, as well as the amount of liabilities that must be repaid with proceeds after sale.

The property of the enterprise includes:

1. Fixed assets. These are real estate, equipment, cars and other property, more expensive than 10,000 rubles, with a useful life of more than 1 year.
2. Securities, bills. By owning them, the company makes a profit, but their sale can also bring significant income. This could be shares of another company or bonds.
3. Intangible assets. These are objects that do not have physical fitness. These include licenses, patents, copyrights, intellectual property etc.
4. Products for production.
5. Finished goods in warehouses.
6. Materials in the pantry.

Determining the liquidation price of all these balance sheet items is necessary in various cases, but in any of them, we are talking about a forward transaction within a limited period of time, in order to generate income.

In what cases does liquidation value arise?

The use of this concept is necessary in a number of cases:

1. Liquidation of the organization.
2. Sale of collateral property.
3. Emergency sale of all properties.

Liquidation of an organization is divided into two types:

1. Planned- when an enterprise ceases its activities by decision of its founders. This happens if a decision is made to reorganize or restructure a company, for example. At the same time, a plan for the sale of property is drawn up, the amount of profit received is determined, depending on the wear and tear of the asset, its relevance and other factors. The sale of property is proceeding as planned.
2. Forced- we are talking about bankruptcy legal entity. In this case, all property is assessed and the so-called bankruptcy estate is determined. Then it is sold through auctions in the shortest possible time.

When selling collateral, using the concept of the liquidation price of the property is necessary to determine the lower limit of the loan or credit amount. By determining this type of value, the lender can clearly understand what the minimum amount will be able to receive upon the sale of such an object, in the event of the borrower’s failure to repay the loan.

If such a situation occurs, the property will be sold to pay off obligations on loans and borrowings.

If it is necessary to urgently sell all existing property, time is usually very limited. In this case, two types of implementation are also distinguished.

It, as in the first case, can be voluntary or forced:

1. Voluntary sale of objects occurs in the case of the sale of the entire enterprise. After this, it continues its activities further.
2. During a forced sale, the seized property is sold during legal proceedings, in case of non-payment of taxes by the enterprise or other violations of the law. The deal takes place in accelerated mode, due to the need to urgently repay the resulting debt, since its amount increases every day by the amount of penalties and fines.

But no matter which option is used, in any case, the time for the transaction is very limited. Failure to repay loans leads to an increase in debt due to the addition of fines and late fees to the principal amount of the debt. Therefore, the time during which a borrower can receive money for his property plays a role decisive role.

Legislative incidents

In modern legislation there is no unambiguous definition of liquidation value and clear cases of its application.

So in Law No. 119-FZ of July 21, 1997. regulating the rules of the concept in enforcement proceedings, it is necessary to calculate the price of the property at the market price, which must be sold at auction within 60 days.

And if its sale occurs through trading, that is, in a compressed time frame, which is typical of non-market methods of sales. All this does not fit the definition of market value described in Law No. 135-FZ of July 29, 1998, which establishes rights and obligations in the valuation field. In such a situation, appraisers in their activities should use not the market price, but the price of the property that is seized.

Factors affecting salvage value

If it is necessary to calculate the liquidation value of a legal entity’s property, this is not always easy to do, since its size is influenced by many factors:

1. Time. As a rule, in such cases, the time frame for selling real estate is very tight. And in a short period of time, finding a buyer who agrees to a deal at an acceptable price is not so easy. Therefore, we have to reduce the cost of the object. The dependence is very simple - the less time for sale, the lower the proceeds from the sale of property.
2. Demand. Depending on the demand in given time For a specific type of property, the maximum price at which it can be sold depends. If the demand is high, then the sale will be carried out as soon as possible, and the seller will receive the maximum benefit.
3. Attractiveness. The more interested the buyer is in acquiring the enterprise, the more profitable the deal. Here a lot depends on the condition of fixed assets, their wear and tear, and the staffing level of the enterprise as a whole.
4. Scope of activity. Much depends on what kind of activity the legal entity is engaged in, and how competitive and economically profitable it is. If a company occupies a certain niche in the market segment and the product or service it sells is in demand, the revenue for its assets increases significantly.
5. Force majeure. It is necessary to take into account other, independent circumstances, which, if they arise, can have a significant impact on the amount of proceeds from the transaction.

Methods for estimating liquidation value

We’ve sorted out the definition a little, now it’s worth considering how to evaluate property and what methods exist for this. There are two main assessment methods: direct and indirect.
The direct calculation method is based on comparison with an analogue, and can be carried out visually or using statistical analysis.

But this method is uninformative under Russian legislation, since it is prohibited to disclose information about transactions during forced sales, as well as the amount received during their execution.

The indirect method is to calculate the value taking into account the market value.

It includes three steps:

1. Determination of the market price of the object.
2. Calculation of the discount arising due to the urgency of the transaction.
3. Direct calculation of the liquidation price.

And to calculate the value of an object upon liquidation, the difference between the proceeds from its sale and the costs associated with its implementation is calculated. But at the same time, it is better to seek help from qualified appraisers, since they have extensive experience and information, to give a more accurate assessment of the proceeds from the transaction.

Liquidation assessment, what difficulties may arise

Sometimes, when an enterprise collapses, it is quite difficult to determine how much its assets are worth. What problems might you encounter?

The main difficulty in real estate transactions, when eliminating the legal entity, is the limited time for sale. Registration of a transaction and transfer of ownership is not a simple or quick process. And to fit in established deadlines, and for this we have to resort to reducing prices.

Another difficulty is that the circle of potential buyers is significantly narrowed, and not all of them can familiarize themselves with the terms of the transaction; this, again, is due to the transience of the transaction.
Also, in an unstable economic situation, it may be necessary to reduce the amount received for real estate due to a decrease in the solvency of buyers.

Estimation of liquidation value in crisis conditions

An unstable economic situation affects all aspects of people's lives and enterprise activities. It also significantly influences the determination of the value of assets during the reorganization of the organization. One of the signs of instability in the economy is the release of jobs. All industries and areas of business suffer at the same time, losing profits, and some cannot withstand this situation at all.

But there are also positive aspects to this situation. Real estate is becoming cheaper and you can start purchasing it or invest money in it. For this you need detailed analysis market, to determine the real value of objects. At a time when the economy is stable, all real estate is sold at market value, but in times of crisis we have to adapt to the situation on the market.

This is where the liquidation value is used, that is, it is the market price, taking into account a discount on various factors that influence it downward. As the crisis progresses, all these factors become more relevant due to instability in the economic and financial sphere.

The difference between liquidation value and market value

Before understanding the differences between these types of prices, it is necessary to define market price.

Market value- this is the amount of money that can be received for an object on the market, in conditions of open competition, when each of the parties to the transaction acts consciously, taking into account all available information about the object, and the price of the object is not influenced by extraneous, extraordinary factors.

At the same time, there is enough time for sales so that a sufficient number of potential buyers can familiarize themselves with the terms of the transaction. All information about the subject of the transaction is as accessible as possible, and each party can easily use it. In this case, the transaction amount suits both parties; for the buyer it is the minimum of those offered, and for the seller, on the contrary, it is the maximum.

The absence of influencing extraordinary factors means that both the seller and the buyer act in their own interests, without exerting pressure. Therefore, the entire operation takes place as planned, without haste and in a sufficiently long time.

This is the main difference between these types of prices. In essence, the liquidation cost is equal to the market cost, but taking into account the factors influencing it downward. And the main factor is the time frame within which the sale must be completed. That is, the liquidation tariff differs from the market tariff in that it is not influenced by third-party factors, and its size is set in accordance with the current state of the market.

How is the transition from market price to liquidation price carried out?

These two concepts of value exist in parallel with each other, and the liquidation price directly depends on the market price. When using the indirect method of real estate valuation, these types of prices are compared for the final price calculation. In this case, a discount is calculated for the urgency of the transaction.

It can reach up to 50% of the market value of the property. The size of the discount depends not only on time limits, it is also influenced by market demand, the state of the economy and the financial condition of the enterprise. It is important to conduct a detailed analysis of all indicators in order to obtain the most tailored cost for a specific type of property.

Thus, the transition is carried out when assessing the property of a legal entity by an indirect method, taking into account various factors.

Liquidation value (hereinafter referred to as LS) is necessary in many cases. For example, its definition is required when transferring an object as collateral in case of obtaining a loan; when closing an enterprise or when financing a debtor enterprise, etc.

The quality of decisions made depends on the correctness of determining this liquidation assessment.

What is “liquidation value” and what affects its value?

IN general view Liquidation value is the price for which an asset can be sold on the market within a strictly limited time frame.

As a rule, specified the valuation is always lower than the market price. And this is due to many reasons, in particular:

In addition to the above factors, the value of the drug is also influenced by the method of its assessment.

Methods for assessing drugs

There are two main drug assessment option:

Therefore, the assessment of this discount occurs by expert means, and its value usually ranges from 10-50% and even higher.

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Species

Liquidation value is divided by three main types:

• ordered drug (or long-term). It occurs when the sale of assets occurs over a long period of time, which allows the property to be sold at a realistic price. This type of liquidation value is characterized by the highest estimate. For hard-to-sell assets (the most illiquid), the period of time given for the sale of assets is, as a rule, 2 years. The main task during the long-term sale of assets is to bring their value as close as possible to the current market.
  The ordered drug product is a calculated value, calculated at current prices minus the costs of selling the property. This is the revenue that a company receives as a result open implementation of their assets over a period of time. During this period, the seller has the opportunity to carry out certain activities aimed at increasing the attractiveness of the assets (for example, repairs, etc.);
• forced medication (or short-term). Such a sale is characterized by a very high speed, as a result of which it is impossible to obtain the real value of the assets. The sale of all assets is usually carried out simultaneously, at one auction. The purpose of such a quick sale is to obtain funds to pay off the company’s short-term obligations or those debts that have become due.
  Forced LP represents the proceeds from the open and immediate sale of property, reduced by the amount of expenses associated with this process. But the time to sell assets is so short that it is not enough to take measures to increase the liquidity of assets. This means that the assessment will be minimal;
• liquidation value of destroyed assets. This name is arbitrary, but it accurately reflects the essence of the process: the drug is determined in order to first write off assets from the register and then destroy them, and not sell them. As a rule, this procedure for liquidating an enterprise is used to build new facilities in its place - and the economic effect from such construction is much higher than from the sale of a liquidated enterprise.

In what cases is this calculation necessary?

First of all, PM required in case:

Step-by-step assessment procedure

In general, drug valuation is the determination of the market value of an asset and the costs of its liquidation (sale or destruction).

It is worth noting that the calculation of drugs should not be based on the quick sale of assets, but on the maximum extraction of income from their disposal, which will allow solving all the assigned tasks or most of them.

Formula

This formula for determining drugs is used most often, since it makes it possible to bring this assessment as close as possible to its market value:

Liquidation value = Market value x (1 – Forced sale ratio)

Forced sale ratio is within the range of 0.1 - 0.5 or from 10 to 50% of the market value of the property.

The value of this coefficient is determined separately, by.

And it affects her influence of many factors:

• timing of property sales;
• type and condition of property;
• market valuation of similar property;
• the current state of the economy, and other factors.

Therefore, experts believe that the specified coefficient should have a lower limit of at least 0.5, i.e. 50%. In addition, the calculation using this formula is very often supplemented with an indicator of liquidation costs, which shows the real proceeds from the disposal of assets.

Nuances in assessing liquidation value

Upon liquidation enterprise due to its bankruptcy The following should be taken into account:

• an enterprise’s property can be assessed as a whole complex;
• the valuation can be carried out by auction, in which the property is sold separately.

In the first case, a quick and profitable sale is complicated by the fact that the value of the enterprise as a whole complex is always high, even if it does not correspond to the real market value of the assets. In addition, when determining the drug in this case, they often forget about the value of the business - its reputation and earned name.

When using the auction method of selling the property of an enterprise, there is a chance to sell it very profitably, but not in in full. Then you should initially decide on those assets that are subject to disposal not through sale, for example, by scrapping them, by destruction, etc. Typically, such assets only supplement the costs of liquidating the enterprise.

Liquidation valuation of fixed assets, including equipment, often depends on their residual value, which is calculated based on the service life of the asset and its original price. In addition, the value of the drug is influenced by many other factors, one of which is the service life, the technical condition of the facility, as well as the availability of more modern analogues on the market. But this does not apply to buildings, which are valued primarily by their location and the number of owners they have.

Liquidation value of shares represents the amount that will remain after the sale of the enterprise's assets, repayment of the enterprise's liabilities at their expense and payments on preferred shares. Typically, this drug serves only as an estimate for, but until the liquidation of the enterprise actually occurs. Then the drug becomes important to those who are going to buy out this business.

What liquidation value is and why it is needed is described in the following video material:

M. Zakharova, O. Yumanova, E. Romanenko; magazine " "

Maria Zakharova,
Leading Specialist of the Assessment and Analysis Department
Olga Yumanova,
Elena Romanenko,
specialist of the assessment and analysis department
LLC “Business Support Group (GPB)”

1. Economic and legal aspects liquidation value.

Market and other types of value .

Market value – the most probable price at which a given valuation object can be alienated for open market in a competitive environment, when the parties to a transaction act reasonably, having all the necessary information, and the value of the transaction price is not affected by any extraordinary circumstances, that is, when:

· one of the parties to the transaction is not obliged to alienate the object of valuation, and the other party is not obliged to accept execution;

· the parties to the transaction are well aware of the subject of the transaction and act in their own interests;

· the valuation object is presented to the open market in the form public offer;

· the price of the transaction represents a reasonable remuneration for the object of evaluation and there was no coercion on the part of the parties to the transaction on any part;

· payment for the valuation object is expressed in monetary form.

It is obvious that if any of the above factors are violated, other, new types of values ​​arise in place of the market value. It is this fact that gives rise to the need to clearly define in each specific situation the type of value that is most adequate.

So, for example, if there are specific goals for acquiring a particular property, it is necessary to determine not the market value, but the investment value. For example, in the situation of acquiring a stake in a television company, it is difficult to talk about the typical intentions of the buyer. The goals of such an acquisition will vary significantly - ranging from purely commercial (generating future income) to completely non-economic (gaining access to an audience). And in this case, it will be fundamentally wrong to proceed from the definition of market value.

Similar reasoning is legitimate to apply in the event of deviation of other factors from determining the market value. The basis for the emergence of the liquidation value considered in this article is the presence of extraordinary or conditionally extraordinary circumstances leading to a violation of market factors. Such circumstances include the factor of limited time for sale and the factor of forced sale.

Typical cases of liquidation value occurrence.

Let's look at typical cases that have these factors (Figure 1) and take a closer look at each of the analyzed situations.

Figure 1: Typical cases of liquidation value occurrence

Upon liquidation of an enterprise there is a need to develop a clear schedule for the sale of property and repayment of the company’s debt (and there are often situations when the total amount of income from the sale of property does not cover all debts). At the same time, the duration of the exposure (pre-sale activities and the sale itself) is greatly limited due to the need to quickly release assets and pay off debt. It is the issue of available time that plays a decisive role in this case in the amount of cost (all other things being equal).

In turn, the duration of the time period is determined by the conditions of each specific case of liquidation. It must be borne in mind that the decision to liquidate itself can be either voluntary (that is, a planned action takes place) or forced. As a rule, the first case provides greater variability in decision-making and makes it possible to develop more effective plans for liquidating the enterprise.

Involuntary liquidation in the bankruptcy process is carried out when a decision is made to open bankruptcy proceedings based on the results of external administration. The resulting bankruptcy estate is subject to sale at open auction. At the same time, the time frame for selling property is extremely limited.

Thus, it is necessary to distinguish between voluntary and involuntary liquidation.

The implementation of collateral objects in the context of this article is rather a hypothetical (detached from reality) concept. In this case, determining the liquidation value is necessary to justify the lower limit of the loan, the security of which is the pledged property and we are not talking about the actual fact of sale of the object. However, to provide a loan, the lender needs to know at what price it will be possible to sell the collateral in a short time if the loan is not repaid. This value in some literature sources is called collateral. However, it can be argued that in its economic essence, it is also liquidation, since there are factors of limited time and forced sale.

The accelerated sale of other property due to the limited duration of exposure also necessitates determining the liquidation value. At the same time, there are also several options for such implementation - either it is an initiative (voluntary) implementation, or forced (under duress), provided for by current legislation.

Thus, in the process of enforcement proceedings, the property seized by a court decision is sold, and within a period not exceeding two months from the date of seizure.

Thus, the property is almost always below its market value. And this fact is negative for the seller of the property and certainly positive for the buyer.

The final definition of the concept of liquidation value.

Thus, having understood the situations that necessitate the calculation of liquidation value, it seems possible to give a final formulation of this concept.

In current Russian legislation, the concept of liquidation value is enshrined only in valuation standards approved by Government Decree: “ salvage value- the cost of the valuation object in the event that the valuation object must be alienated within a period shorter than the usual period of exposure of similar objects.”

More detailed and correct definition contained in the Standards of the Russian Society of Appraisers (ROO): “ liquidation value or forced sale value- the amount of money that can realistically be received from the sale of property in a time frame that is too short to allow adequate marketing as determined by market value. In some states, forced sale situations may include those involving an involuntary seller and buyer, or buyers who are aware of the seller's hardship."

In Western literature, two types of liquidation value are distinguished - ordered (orderly liquidation value) and forced (forced sale value). The second corresponds to the Russian definition, the first assumes that the owner has enough time to ensure that the exposure period of the object is optimally close to the market average.

It is necessary to avoid substituting the concepts of liquidation value and net income from liquidation, which arises when selling property after the end of its useful life. The sale of such assets is usually carried out in the most in an efficient way in order to partially compensate for the costs of their acquisition in the past.

Legislative incidents.

In everyday practice, there is a problem of regulatory and legislative regulation of the application of liquidation value and securing its unambiguous interpretation.

For example, in accordance with the Federal Law of July 21, 1997 No. 119-FZ “On Enforcement Proceedings,” it is required to calculate the market value of property that must be sold at auction within 2 months. But, if it is sold at auction, that is, for a limited period of time, which is typical for non-market conditions of sale, then this does not correspond to the concept of market value enshrined in Article 3 Federal Law dated July 29, 1998 No. 135-FZ “On valuation activities in the Russian Federation”. Moreover, the concept of liquidation value is defined in the “Valuation Standards Mandatory for Application by Subjects of Valuation Activities” approved by the Decree of the Government of the Russian Federation.

In this case, appraisers should calculate not the market value, but the liquidation value of the seized property. There is a contradiction between various legislative acts.

2. Analysis of factors that determine the difference between liquidation value and market value.

All factors underlying or accompanying liquidation value can be roughly classified (Figure 2).

Figure 2: Salvage Value Factors

Objective factors are present when determining the liquidation value in any situation. Their influence cannot be ignored, and, in fact, they practically do not depend on the state of affairs at a particular enterprise (with the exception of the general condition of the property). Moreover, all objective factors have a mutual influence on one another. For example, favorable market conditions can reduce the optimal exposure time, etc.

The most important factor influencing differences in market and liquidation values ​​is property exposure period . Moreover, the lower the planned exposure period of the liquidated property compared to the optimal one, the more the possible cost decreases.

Diagrams 1-3 show the ratio of market and liquidation values ​​of real estate in Moscow in 1998-2000. (V %)

Diagram 1: Ratio of market value and forced sale value office buildings and premises, %

Chart 2: Market value to cost ratio forced sale of commercial buildings and occupancy, %

Diagram 3: Ratio of market value and the cost of forced sale of warehouse and industrial buildings and premises, %

Source: S. Chemerikin “Liquidation value in real estate valuation.”

In fact, the period of exposure of property is a fundamental factor that significantly influences all other factors, both in the direction of increasing their impact and weakening it. Obviously, with an increase in the planned duration of the exposure, more real opportunities appear for the use of effective marketing measures, leveling negative influence short-term market-shaping factors, etc.

General investment attractiveness of the property is based on the individual characteristics of the property (functional purpose, physical condition) and has a direct impact on the level of consumer demand.

In the case under consideration (during the liquidation of an enterprise), specific factors are activated, which can be conventionally called "excretion factors"(in principle, these factors are very close to the investment attractiveness factor). The essence of these factors is that many objects of the property complex individually do not represent any value and in fact cannot be sold at a normal price, while within the framework of the liquidated enterprise these objects played a significant role. The analyzed aspect has a particularly negative impact on the so-called intangible assets and, first of all, on the business reputation of the company (goodwill), which includes the value of personnel, relationships with suppliers, well-functioning business structure, etc. When a company is liquidated, it is not possible to realize this, sometimes one of the most valuable assets.

Absolute value of the market value of the object has the opposite effect on the level of liquidity - the higher the market value of the object, the less effective demand for it becomes due to a decrease in the number of potential buyers.

Factors that directly influence the level of cost of objects include: market conditions during the liquidation period. The longer this period, the more opportunities the enterprise has to analyze the market situation and choose the most optimal course of action in the current circumstances. And, conversely, with a short exposure period and unfavorable market conditions, losses on the sale of objects will increase even more. And to hope for a general rise in the market during the short period of liquidation of the company is, to say the least, unreasonable.

Marketing effectiveness is also significantly complicated by the short-term period allocated for carrying out the relevant activities. However, it equally depends on the specific means used to increase the selling price of the property.

Another important objective factor is psychological aspect forced sale, which is expressed in a certain impact on the initiative of buyers. Moreover, the impact this factor it is also quite twofold - on the one hand, feeling that the seller is in initially unfavorable conditions, buyers begin to dump, but on the other hand, feeling competition with each other, they are afraid of missing out on the property being sold and are forced to compromise.

Subjective factors reflect the specifics of each specific enterprise. These factors manifest themselves especially negatively in enterprises with ineffective managers, which leads to significant difficulties during liquidation. Such factors include a whole system of phenomena. Thus, inventory and assessment of fixed assets of bankrupt enterprises is almost always complicated by the state of accounting registers, the lack technical passports for equipment and BTI passports for real estate. This series continues with the lack of legal documents for property, the complexity of record keeping, and the lack of employees who can provide the necessary clarifications. All these facts lead to the fact that before drawing up a specific plan and determining the timing of liquidation, it is necessary, in the full sense of the word, to “rakes up” the property of the enterprise, to restore the chain of occurrence of certain obligations both on the part of the enterprise itself and its partners. This leads to a colossal complication of the liquidation process.

However, it would be wrong to think that the factors considered are always only negative character. On the contrary, a clear organizational structure and effective, conscientious work of the enterprise’s divisions can significantly speed up liquidation processes.

Indeed, instead of spending 3-6 months identifying the current state of the enterprise’s property in the event of its ownerlessness, it would be better to use this period to increase the time for selling the property complex, which is very important.

Table 1 provides an analysis of possible difficulties and factors causing these difficulties, broken down by individual types of property.

Table 1: Influence of liquidation value factors on various types property

Impact factor	Exposure period	Invest. attractiveness	Factors of "excretion"	Market value	Market conjuncture	Marketing	Subjective factors	Comments
Type of property
Buildings, structures and land plots	high	high	average	average	high	average	very tall	The legal aspects of real estate registration, the availability of technical documentation, and the individual characteristics of the property are extremely important. The liquidation value, as a rule, differs significantly from the market value.
Intangible assets (trademarks, patents, certificates, etc.)	high	high	high	average	average	average	high	When assessing the liquidation value of this type of property, the legal aspects of its registration are also extremely important, as well as the real benefits that this or that intangible asset can bring to the new owner, taking into account the isolation of this object from the framework of the liquidated enterprise. Buyers for such assets are quite specific, and finding them is difficult. The liquidation value often differs enormously from the market value.
Unfinished construction	very tall	very tall	high	average	average	average	average	Here, the individual characteristics of the property are extremely important and the search for potential buyers is difficult. The liquidation value differs very significantly from the market value.
Machinery, equipment and vehicles	medium/high	high	high	average	average	high	average	When assessing the value of this property, the individual characteristics of the object and its functional (moral) wear and tear are extremely important. Depending on the age of the property, the differences between the liquidation value and the market value are assessed as quite high and moderate.
Financial investments (stocks, bonds, bills, shares in other enterprises)	high	very tall	average	average	average	high	average	This type property is most often very specific, which complicates the search for potential buyers. In many cases, the financial investments of enterprises turn out to be completely illiquid. The liquidation value can differ significantly from the market value, or insignificantly up to the point of coincidence (for example, for securities traded on the stock market).
Raw materials	average	high	average	average	high	average	average	This is perhaps one of the few types of assets that can be sold in a fairly short time, depending on their individual characteristics. Liquidation value, as a rule, does not differ very significantly from the market value.
VAT	very tall	very tall	very tall	-	-	-	average	This is a very specific type of asset that can be conditionally classified as property. Some of the unrecovered VAT can be attributed to deferred receivables from the budget, which can be used during the life of the enterprise until it completely stops at the end of the liquidation process. As such, it is impossible to sell this asset, but it can be partially compensated, thereby saving the money received, for example, from the sale of the organization’s fixed assets.
Accounts receivable	very tall	very tall	average	short	short	short	average	This type of asset is also very specific. The reliability of the debtor, as well as the timing of debt repayment, are important in determining its liquidation value. If the repayment period is outside the liquidation period, then you will have to resort to forfaiting operations, selling debts, which will lead to a significant reduction in the real money that the liquidated enterprise will receive. The liquidation value of an asset may differ from the market value either significantly or not significantly.
Cash	-	average	-	-	-	-	-	In this case, receipt of funds in full will depend on the reliability of the bank in which the company's current accounts are opened.
Deferred expenses	high	high	high	short	short	short	short	This type of property can be sold only if any benefits from its use are retained. For example, useful software products, etc.

3. General methodological problems of calculating liquidation value.

A simplified scheme for calculating the liquidation value of an enterprise is as follows:

WITH adjusted (revalued) value of all assets

- the amount of current costs associated with liquidation (costs of preserving assets until they are sold, etc.)

- the amount of all obligations.

For the purposes of this article, we will focus on examining the key problems that arise when calculating liquidation value.

Specific characteristics of liquidated enterprises.

First of all, it is necessary once again to take into account the fact that in most liquidated enterprises the state of property accounting and its legal support, to put it mildly, leave much to be desired. These facts further aggravate the problem of limited sales time. For example, one process of registering ownership rights to a particular piece of real estate takes quite a long time (up to several months). In addition, the technical condition of the fixed assets of bankrupt enterprises almost always requires additional capital investments upon purchase, which narrows the circle of potential buyers. Particular attention should be paid to determining functional and obsolescence - as a rule, the fixed assets of such enterprises were acquired a long time ago and do not meet modern technological and functional requirements.

Application of assessment approaches.

In the process of revaluing the assets of an enterprise, it is possible to use three approaches: income (based on the benefits that can be received by the owner of this property in the future), comparative (based on sales prices of similar property on the open market) and costly (based on determining the costs that would be incurred by the potential owner upon its acquisition/recreation). A logical question arises: which approach should be trusted to the greatest extent when calculating liquidation value?

Based on the fact that sales time is limited and it is impossible to convey to potential buyers complete information about the advantages of this or that asset, and, as a consequence, the need for the buyer to independently determine the estimated cost of the object by analyzing the open market, it seems advisable to focus on the comparative (market) approach. However, this does not at all exclude the possibility of using the results obtained within the framework of the other two approaches. Moreover, situations arise in which the use of a comparative approach is generally impossible.

Thus, when deriving the final value of an asset, it is necessary to pay particular attention to the issue of reconciling the results obtained within the framework of the applied approaches. Thus, when coordinating the results of real estate assessment, the cost approach, due to the specifics of the investment climate in Russia, should not be given a large share of weight. Investments are mainly made in the construction of residential real estate, with investments in the construction of office buildings in second place. Investments in the construction of industrial and shopping complexes, as a rule, are carried out by large financial holdings, while the majority of potential owners of such real estate prefer to purchase something that has already been built, which ultimately turns out to be cheaper than construction. Accordingly, the greatest share in the coordination of results should be given to the comparative approach.

Transition from market to liquidation value.

And yet, the main issue that arises when calculating the liquidation value remains the question of the transition from the market value of property to the liquidation value .

In general, liquidation value can be calculated using two methods:

¨ The direct method is based solely on a comparative approach. The application of this method is realized either through direct comparison with analogues, or through statistical modeling (correlation and regression analysis). However, information on transaction prices under conditions of forced sale is difficult to access, which makes the possibility of using this method extremely limited. Although, if he has the necessary information, he has high degree objectivity.

¨ The indirect method is based on calculating the liquidation value of an object based on its market value.

The scheme for calculating the liquidation value of a property using the indirect method is as follows:

market value of the property

–

discount on the fact of forced sale.

Thus, the main methodological problem in this case is the determination of the discount for the fact of forced sale (amendment reflecting the conditions of sale).

There are several ways to determine the discount for the forced nature of the sale: the method of comparison of paired sales (in which the sales prices of identical property are analyzed under normal conditions and in a short period of exposure), the method of direct analysis of characteristics and the expert method.

Most often they turn to the third, expert method, which is due to the fact that the necessary information is limited. As a rule, the discount for a forced sale is in the range from 20% to 50%. Of course, the value of the correction factor may be different, depending on the specific conditions of liquidation.

In any case, the calculation of this coefficient involves substantiating and identifying the factors that determine the decrease in the market value of each specific type of property.

Thus, it is possible to use the table proposed in the section “Analysis of factors that determine the difference between liquidation value and market value” as a starting point. To do this, it is necessary to rank all factors by importance within each specific object, giving a certain range within which the amount of the discount can vary. It should be borne in mind that the total value of the values ​​of the upper ranges of all factors should not exceed 100%.

For example, when assessing a property, it is possible to carry out the following ranking of factors (naturally, when using the proposed scheme in practice, it is necessary to carefully take into account the specifics of a particular situation, which may lead to a different ranking option) according to a 10-point scheme:

Impact factor	Degree of influence on the final result	Rating (10 per point scale)	Forced sale discount range
Exposure period	High	8	8/47*100% = 0-17%
Investment attractiveness	High	8	8/47*100% = 0-17%
"Isolation" factors	Average	5	5/47*100% = 0-10,7%
Market value	Average	5	5/47*100% = 0-10,7%
Market conditions	High	7	7/47*100% = 0-15%
Marketing	Average	5	5/47*100% = 0-10,6%
Subjective factors	Very high	9	9/47*100% = 0-19%
Total value		47	0-100%

After determining the ranges of the forced sale discount by factors, a thorough analysis of the situation is carried out and a specific discount value is selected for each factor, after which the resulting values ​​are summed up.

Similar calculations are made for all types of property owned by the liquidated enterprise.

4. For whom is it necessary to calculate the liquidation value, and why involve an appraiser?

Determining the liquidation value is aimed at solving a number of problems that directly depend on the consumers of this information. The main users (in most cases, customers) of the final calculation of liquidation value are credit managers, arbitration managers and enterprise managers.

Credit managers.

When granting a loan, the security of which is the pledged property, important stage is the valuation of this property. It is advisable to entrust this calculation to qualified specialists in the field of assessment, that is, to carry out an independent assessment. (I have not found legal confirmation of the mandatory independence of the appraiser, but I think it is important to say this) That is why credit organizations and other structures can use the services of appraisers by concluding an agreement with specialized organization to determine the liquidation value. The real fact of object implementation may not take place. However, in order to provide a loan in a reasonable amount, the lender needs to know at what price in the event of non-repayment of funds it will be possible to sell the collateral, that is, in the event of a forced sale and a shortened exposure period. Timely calculation of liquidation value allows you to avoid issuing loans of unreasonably inflated amounts and speed up the process of selling collateral.

Arbitration managers.

In the process of liquidating an enterprise, in order to speed up the process of selling assets, it should facilitate the assessment of objects. Early determination of salvage value along with analysis financial condition the debtor leads to making an informed decision on the procedures and timing of the auction. Thus, increasing the exposure period of assets contributes to an increase in their value.

Leading managers.

The significance of calculating liquidation value for executive managers is twofold.

Firstly, the acquisition of assets at liquidation value allows the purchasing enterprises to receive obvious benefits both in the case of further resale of the property at market value (in the form of the difference between market and liquidation values), and in the case of its operation (in a different situation, the acquisition of similar property would cost would be more expensive).

Secondly, senior managers need to remember that one of the directions of business restructuring (reorganization) is the strategic direction. Within its framework, activities are carried out for mergers, acquisitions of companies, and partial liquidation of businesses in a short time. As a rule, any decision on the future fate of an enterprise is based on the development of several development options, including the possibility of its liquidation.

Thus, attracting qualified assessment specialists will allow you to maximize the efficiency and timing of calculating the liquidation value, which is an important component of the final result of the liquidation process as a whole.

List of used literature:

1. “Business Valuation”: ed. A.G. Gryaznova, M.A. Fedotova - M.: Finance and Statistics, 2000.

2. V. Galasyuk “On the definition of the concept of liquidation value.”

3. V. Galasyuk “Increasing the value of an enterprise using liquidation value.”

4. S. Dolgin “Procedure (features) for assessing the liquidation value of the bankruptcy estate.”

5. Yu. Kozyr “Evaluation of liquidation value.”

6. S. Chemerikin “Liquidation value in real estate valuation.”

“Valuation standards that are mandatory for use by subjects of valuation activities.” Approved Fast. Government No. 519 of 07/06/2001

International Glossary of Business Valuation Terms (The National Association of Certified Valuation Analysts (NACVA)).