Liquidation value - how to calculate it. Liquidation value factors. The most acceptable concepts for determining liquidation value
Liquidation value
In the process of interaction between economic entities, the need often arises to determine the liquidation value of an object of economic relations. For example, when issuing a secured loan, the security of the loan depends on the accuracy of determining the liquidation value of the collateral. In the event of liquidation of an enterprise, it becomes necessary to determine the liquidation value of its assets for their sale. However, assessing the value of an enterprise is necessary not only in case of liquidation of the enterprise. It is important in many other cases, for example, when financing a debtor's enterprise; when financing the reorganization of an enterprise; when changing the enterprise, carried out without legal proceedings; when developing a plan for repaying the debts of a debtor enterprise that is under threat of bankruptcy; when analyzing and identifying the possibility of separating individual production capacities of the enterprise into economically independent organizations; when assessing applications for the purchase of an enterprise; when examining fraudulent transactions for the transfer of property rights to third parties; during the examination of enterprise reorganization programs.
In the conditions of the modern “information” economy, the competitive advantages of an enterprise are determined not by the presence of high-quality physical assets and streamlined production, supply and sales processes, but by the ability to create innovations and sell them to consumers in the form of high-tech products. This requires a radical revision of traditional approaches to management, the development of new criteria and a new methodology that meet modern requirements.
The main goal of any enterprise is or should be to maximize value for the owners (shareholders), i.e., the economic benefits that they receive from investing capital in this enterprise. As studies by domestic and foreign authors show, in countries whose economies are not focused on maximizing value for owners, investors receive less return on invested capital than in countries with such a focus. Further globalization of the capital market means that the former will experience an outflow of investment and fall behind in global competition. Thus, as capital mobility increases, an enterprise management system focused on increasing value is gaining more and more weight and importance.
The focus on increasing value for the owner as a criterion for managing a modern industrial enterprise does not contradict the long-term interests of all other business participants.
Moreover, owners are the only business participants who, while caring about maximizing their own well-being, simultaneously contribute to improving the well-being of everyone else. This is due to the fact that the owner of the enterprise is the residual owner and receives economic benefits in the form of dividends only after settlements with other business participants are made -
suppliers, personnel, government and creditors. The complexity and versatility of the problem of increasing the value of a business, its novelty for the Russian economy of the modern period, necessitate the presentation in this paragraph of the basic concepts and approaches to determining the value of a business in accordance with international standards and the legislation of the Russian Federation, as well as mathematical models for its calculation. According to International Valuation Standards (IVS), the value ( value) is the market's view of the benefits acquired by those who own a given product or use these services on the date the value is determined. The main type of value is market value.
Market price(market value) – this is the assumed sum of money, for which the sale of the asset at the valuation date would have taken place from a willing seller to a willing buyer as a result of an arm's length transaction, after proper marketing, in which each party would have all the necessary information, act prudently and without coercion. Market value is understood as the value of an asset, determined without taking into account the costs associated with the sale or purchase, and without compensation for the cost of paying any associated taxes.
Book value(book value) is the difference between total assets (less depreciation) and total liabilities, as reported on the balance sheet. Thus, unlike market value, book value reflects the “historical” prices at which assets were purchased in the past.
Book value of net assets of an enterprise is determined in accordance with the legislation of the Russian Federation by subtracting from the amount of assets accepted for calculation the amount of liabilities accepted for calculation.
The value of net assets is calculated using the formula
A net = A − K loan,
where A is the amount of assets accepted for calculation;
K loan – the amount of liabilities (borrowed capital) accepted for calculation.
The book value presented in the financial statements usually does not correspond to the actual market value of the net assets of the enterprise.
From the point of view of the development prospects of the enterprise, liquidation value and the value of the operating enterprise are distinguished.
Liquidation value of an enterprise is the amount that the owner can gain from the sale of the enterprise's assets on the market after settlement of all obligations. Liquidation value is calculated using the formula
V likv = V Achist - with liquid - with urgent,
Where V Achist – market value of net assets (see definition below);
liquid – liquidation costs;
urgent – discount for urgency.
As can be seen from the formula, when assessing the liquidation value, the costs associated with the liquidation of the enterprise and a discount for urgency, reflecting the impossibility of conducting adequate marketing, are taken into account. Liquidation value can be thought of as the minimum guaranteed amount of money an owner can receive from a business. Methodologically, the calculation of liquidation value is based on an assessment of the market value of the enterprise's net assets.
Market value of net assets of an enterprise is the difference between the market value of the enterprise's assets and the value of its liabilities reduced to the current point in time. To calculate the market value of net assets, the formula is used
V Achist = V A − V about,
Where V A – market value of the enterprise’s assets; V ob – the present value of the enterprise’s liabilities.
The starting point for assessing the market value of assets V And is their book value, discussed above. To obtain a reasonable market value, adjustments are made to individual items of the asset.
Liquidation value is divided into three types:
Ordered salvage value. The sale of a business's assets is carried out over a reasonable period of time so that high prices can be obtained for the assets being sold. For the least liquid real estate of an enterprise, this period is about 2 years.
Forced liquidation value. Assets are sold off as quickly as possible, often simultaneously and at the same auction.
The liquidation value of the demise of a business's assets. In this case, the assets of the enterprise are not sold off, but written off and destroyed, and a new enterprise is built in this place, providing a significant economic or social effect. In this case, the enterprise value is negative value
, since certain costs are required to liquidate the assets of the enterprise. Based general rules on the liquidation of legal entities established in Articles 61-65 of the Civil Code of the Russian Federation, the main difference between liquidation legal entity
(enterprise) from its reorganization in any form is that liquidation does not imply succession, that is, the transfer of the rights and obligations of the liquidated enterprise to other entities.
There is the possibility of voluntary liquidation (self-liquidation) of an enterprise, in particular in connection with bankruptcy. In accordance with Article 24 of the Federal Law “On Insolvency (Bankruptcy)”, in the absence of objections from creditors, a debtor, which is a legal entity, may declare its bankruptcy and voluntary liquidation.
The legislation does not limit the discretion of the participants of a legal entity when determining the grounds for making a decision on its liquidation. Therefore, it should be assumed that shareholders - owners of voting shares have the right, in the prescribed manner, to decide to liquidate the enterprise due to the inexpediency of continuing its activities for any reasons determined by them.
Calculation of the liquidation value of an enterprise includes several main stages:
The latest balance sheet is taken.
A calendar schedule for asset liquidation is being developed, as the sale various types assets of the enterprise requires different time periods.
The gross proceeds from the liquidation of assets are determined.
The estimated value of assets is reduced by the amount of direct costs (commissions to appraisal and law firms, taxes and fees). The adjusted values of the assets being valued are discounted to the valuation date at a discount rate that takes into account the risk associated with the sale.
The liquidation value of assets is reduced by the costs associated with holding the assets until they are sold, including the cost of holding inventory. finished products and work in progress, preservation of equipment, machinery, mechanisms, real estate, as well as management costs for maintaining the operation of the enterprise until the completion of its liquidation.
The discount period for the corresponding costs is determined according to the calendar schedule for the sale of the enterprise's assets.
The operating profit (loss) of the liquidation period is added (subtracted). Preferential rights to severance pay and benefits are deducted employees of the enterprise
, claims of creditors for obligations secured by a pledge of property of a liquidated enterprise, debt on mandatory payments to the budget and extra-budgetary funds, settlements with other creditors.
When formulating the final conclusion regarding the liquidation value of the enterprise, the factors that led to the bankruptcy of the enterprise are analyzed once again. If the bankruptcy situation is due to a low level of management, then the liquidation value obtained as a result of calculations is not adjusted. If the reason for bankruptcy was the location of the object, external conditions, such as: the general economic situation, tax policy, etc., then the resulting liquidation value is adjusted downward.
If possible, several assessment methods should be used:
Calculation of the market value of assets (net asset method). It is performed on the basis of the balance sheet as of the last reporting date and preferably simultaneously with the inventory of the enterprise’s property as of the valuation date. Obviously, the degree of detail in the assessment will depend on the completeness and reliability of the value of the information provided to the appraiser. The liquidation value in this case is numerically equal to the market value obtained by the net asset method, and will depend on factors such as the period of marketing research and operations, which in this case is a long period (up to 18 months) and costs associated with marketing and the liquidation procedure enterprises. The most likely stakeholders in this type of liquidation value assessment will be the founders and shareholders, who most often want to preserve the enterprise in its current form.
Assessment of liquidation value in accordance with “ Methodological recommendations on the accelerated procedure for applying bankruptcy procedures.”
The FSFO is interested in this method of assessment, striving to find an effective owner for the debtor organization as quickly as possible. This type of liquidation value is the normative-calculated liquidation value that occurs in connection with the planned liquidation of the enterprise. The result of such an assessment of the liquidation value and the sale of the enterprise in accordance with it is the emergence of two enterprises: one of them remains with debts, but without property, while the other becomes the owner of property, but without debts.
Estimation of liquidation value using the classic auction method
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, the involvement of qualified valuation specialists will 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.
When calculating the liquidation value of an enterprise, it is necessary to take into account and subtract the costs of liquidating the enterprise from the replacement cost of assets. These are administrative costs for maintaining the operation of the enterprise until the completion of its liquidation, severance pay and payments, costs of transporting sold assets, etc. The proceeds from the sale of assets, cleared of associated costs, are discounted at the valuation date at an increased discount rate, taking into account the associated this sale is a risk
Liquidation value is the maximum price at which an organization can be sold in the event of emergency liquidation, that is, within a limited period of time. It is always less than nominal. It is important to note that liquidation value refers to the maximum price at which it can be sold. Often companies are sold at an even lower price, however, this is a drawback of the management system.
Liquidation value depends on many factors and the structure of the enterprise; it is required in case of bankruptcy or emergency sale. The assessment of liquidation value is carried out by private experts or special organizations.
An important condition for the appearance of liquidation value is unforeseen events that affected the enterprise or. In addition to bankruptcy, the liquidation value can also be calculated as a precautionary measure.
The main internal and external factors on which the liquidation value depends
- Time period for sale. It is also called the exposure period. The price of the company is directly proportional to the time allocated for the sale. The lower the exposure, the lower the cost. The timing is determined based on many factors, primarily taking into account demand and also the type of enterprise.
- The company's position in the market and the economic situation in a certain segment.
- Attractiveness to potential buyers. Usually it depends on the level of equipment of the enterprise and the condition of the means of production.
- It is important to take subjective factors into account.
In what cases is it required expert review:
- or a real threat of its occurrence.
- Cases where enterprises are obviously lower than the profit from the sale. Then a liquidation procedure is carried out, which allows you to save part of the funds. This also includes situations of sudden changes in market conditions, when manufacturing process becomes expensive.
If a business makes an assessment of salvage value, this does not necessarily indicate a subsequent sale. This is a precautionary measure in case of emergencies.
Methods for assessing liquidation value
There are two main methods - indirect and direct. The choice of methodology depends on the type of enterprise; the calculation results may differ slightly when using different approaches.
- Direct calculation method. Based on a comparison of the main characteristics of the enterprise. First of all, the sales volume in the company and from competing organizations is analyzed. Then they evaluate the main production indicators and, based on the data obtained, make a conclusion about the optimal cost. When applying this technique, little attention is paid to the exposure time, but it gives an idea of how much the liquidation value is less than the average market price for such a company.
- The indirect calculation method involves the allocation of liquidation value based on the market value. First, , is calculated, and then the discount amount associated with the exposure period is determined separately. The main difficulty in applying this method is calculating the discount, since it depends on many factors, including subjective ones. According to statistics on the Russian market, the average discount is approximately 20-50%. The indirect method is used mainly by experts, since it is necessary to have a clear understanding of market trends in order to calculate the adequate cost of a forced sale.
Calculation of liquidation value in crisis conditions
There is a practice of selling production at market prices in stable market conditions. When a crisis occurs, additional factors affect implementation, which significantly reduce the cost. The main difficulty is that during periods of crisis it is impossible to obtain reliable statistical data for calculations. Therefore, in an unstable economic situation, they often resort to the indirect method. The accuracy of estimating liquidation value depends on the competence of experts.
Liquidation value - This is an assessment of a property 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:
- 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.
- 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.
- Intangible assets. These are objects that have no physical form. These include licenses, patents, copyrights, intellectual property, etc.
- Products for production.
- Finished goods in warehouses.
- 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 in limited time, for the purpose of generating income.
In what cases does liquidation value arise?
The use of this concept is necessary in a number of cases:
- Liquidation of the organization.
- Sale of collateral property.
- Emergency sale of all properties.
Liquidation of an organization is divided into two types:
- 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.
- Forced- we are talking about bankruptcy of a 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. Defining this type value, the lender can clearly understand what minimum amount
will be able to receive upon the sale of such an object, in the event of non-payment of the loan by the borrower.
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: Voluntary sale of objects occurs in the case of the sale of the entire enterprise.
- After this, it continues its activities further.
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 transaction is being carried out in an accelerated manner, due to the need to urgently repay the resulting debt, since its amount is increasing 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 within which a borrower can receive money for his property plays a decisive role.
Legislative incidents 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: 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 will agree 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. 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. 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. Field 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 property increases significantly. 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.
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:
- Determination of the market price of the object.
- Calculation of the discount arising due to the urgency of the transaction.
- 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 in order to meet the 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
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 downwards. 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 price- 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 financial condition
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 (LV) is defined as the difference between the gross proceeds from the sale of assets and the costs associated with the liquidation and sale of assets, i.e. this is the value of the net proceeds from the sale of assets of the liquidated enterprise. The definition of this type of value involves “the termination or curtailment of the activities of a company by converting assets into cash for the purpose of subsequent payment of these funds to creditors in accordance with the priority rights that they have. And the remainder, if any, will go to the owners of the company in proportion to their participation in the capital.”
Let's consider the question: when is an assessment of liquidation value necessary? It should be carried out in the following cases:
- when a company is liquidated due to bankruptcy;
- upon voluntary liquidation of a business;
- if the company's projected cash flows from continuing operations are below its net assets. This is when LV may be the maximum potential valuation for such a business.
- real estate, incl. land;
- cars and equipment;
- intangible assets, incl. client base, development licenses individual species minerals and related reserves, such as oil and gas reserves;
- financial assets, incl. accounts receivable, investments in securities.
Indeed, only fairly narrow specialists in the valuation of certain types of assets are able to assess how much their potential sales value differs from the monetary indicators recorded in the financial statements.
When assessing LV, we proceed from the possibility of determining it depending on the temporary conditions for the sale of the enterprise’s assets, namely:
- or the cost of a forced sale of assets; sometimes, as already noted, such LV is called auction value;
- or the value of an orderly, albeit time-limited, sale of assets with the expectation of achieving the highest possible proceeds. In the Guide, this type of LV is called normal value (clause 705.11, p. 241), i.e. “the value of assets during a normal liquidation process” (ibid.).
Essentially, justifying a particular amount of liquidation value (either during an auction sale, or during a time-ordered sale of assets) is the task of achieving optimal sizes net revenue. The optimization criterion is maximizing net revenue. Solve this problem without discounting possible revenues and corresponding costs, i.e. without obtaining the reduced, current value (PV), it is impossible.
Let's show it on conditional example(Table 22).
TABLE 22. Example of initial balance
The bankruptcy trustee offers creditors the following options for selling assets (without taking into account the inflation factor):
- Option 1 - sell assets within 30 days;
- 2nd option - sell all assets entirely in 12 months;
- Option 3 is to sell short-term assets after 6 and long-term assets after 12 months.
So, option 1: assets can be sold, taking into account the timing of these operations (30 days), with a high discount, say 50%. The total amount of the sale will be 500 (250 + 250), which reaches 71% of the total amount of liabilities (500/700); no discounting operation is needed here (period less than 1 month).
- 2nd option: it is possible to sell assets without a discount, however, over 12 months, the current value factor at a discount rate of 40% will be 0.675. In this case, the real value of money can be 675 rubles. (500 x 0.675 + 500 x 0.675), which is 0.96 in relation to liabilities (675/700).
- nd option: for 6 months the current value factor will be equal to 0.821, and for 12 months - 0.675. Total revenue will be equal to 749 (500 x 0.82 500 x 0.675), and in relation to liabilities - 1.07.
The final results of the sale of assets in relation to the value of liabilities look like this (Table 23).
TABLE 23. Final results of the sale of assets in relation to the value of liabilities
| 1st option | | 2nd option | Option 3 | |
| | | | | |
Of course, this calculation is quite conditional: we proceeded from a uniform discount rate for all assets. In fact, the risks of selling individual types of assets are not the same, which means that discount rates should also be different.
I note that I once encountered a negative assessment of the possibilities of using discount rates when determining the terms of sale of certain types of assets of a liquidated enterprise. One of the students in the valuation courses I conducted stated that no discounting should be used at all, since debt repayment should still be carried out at their face value. But it’s one thing, I answered him, to receive 1 million rubles in repayment of debt. tomorrow and a completely different matter - in 12 months. Therefore, setting deadlines for the sale of individual assets of a liquidated enterprise allows you to choose the most acceptable option for the sale of assets for creditors.
At the same time, I do not completely agree with the authors of the “Guide to Business Valuation” that when determining lv, “the net proceeds received after the liquidation (sale - V.R.) of the company’s assets and payment of debt are discounted (reduced) to current value" (clause 705.01, p. 237). Lenders are not at all interested in the fact that the balance of liquidation value can be presented taking into account the depreciation of money over time. Mainly, such calculations are needed in order to justify the most acceptable terms for creditors for the sale of assets of an enterprise that had obligations to them. After all, from this proceeds the bankruptcy trustee must pay off creditors. However, discounting of proceeds has, one might say, an official nature. But without discounting net proceeds, I emphasize once again, it is impossible to justify reasonable timing for the sale of various assets.
It is possible, but not at all necessary, to draw up a balance sheet taking into account discounted values. It is at this point that I disagree with the authors of the Guide I quoted.
But what I agree with them on is that the discount rate to determine LY should be quite high. In the example of the corresponding calculations using the discount rate when determining the liquidation value, at first glance, these authors use an unusually significant rate - 48% (clause 715.19, p. 252).
As a rule, when determining the liquidation value, the Guide states, “the consultant (appraiser - V.R.) ... uses a higher discount rate than the usual rate for an operating enterprise ... Discount rates can be equal to the required rate of return on investment venture capital... Such rates can reach 35-60% or more” (clause 715.15, p. 251).
I believe that one clarification is needed here regarding the sale of certain types of assets belonging to a liquidated enterprise: the same rate is not always acceptable for all types of assets; Relatively lower discount rates should be applied to relatively more liquid assets. But for the assets being valued, the base discount rate must be no less than 36%. How can this value be justified? The minimum interest rate taken into account as cost elements, according to the Tax Code of the Russian Federation, is equal to the refinancing rate of the Central Bank Russian Federation, multiplied by an adjustment factor of 1.1. Now this rate is 11.5%, i.e. minimum amount of benefits from alternative uses Money the buyer of these assets will be 12.7% (11.5 x 1.1). To this we need to add an estimate of the annual inflation rate. It is better to use an index calculated in relation to those assets that are supposed to be sold upon liquidation of the enterprise. IN modern conditions this is approximately 11% per annum. Total 23.7% (12.7 + 11.0). You should also take into account the risks associated with the difficulties of selling certain types of assets, say 12%. In this case, the discount rate will be 357% (23.7 + 12.0). What about the top one?
It would probably not be a significant exaggeration to name the figure given in the Guide - the maximum discount rate when determining LY is 60%.
So, we will call the “fork” the discount rate for estimating the liquidation value Russian enterprises who are involved in the process of selling the bankruptcy estate: 36-60%. I note that there is a tendency for these discount rates to decrease, which is associated with a decrease in refinancing rates and inflation rates.
As a rule, proceeds from the sale of assets turn out to be significantly less than that recorded in the financial statements. “In a market economy, a typical situation is when, upon liquidation of an enterprise, 40% or less of the book value of inventories is recovered,” it says textbook, published by the Financial Academy under the Government of the Russian Federation. The situation is even more complicated when it comes to equipment, especially special purpose.
Let us also note the impact of inflation. The higher its level, the more important, other things being equal, for creditors is that the assets of the bankrupt enterprise be sold as soon as possible.
Let us present a scheme for determining liquidation value.
When determining the balance of liquidation value, they proceed from the real possibilities of obtaining one or another proceeds from the sale of certain types of assets. This is how the “Asset” section of the liquidation value balance sheet is formed.
In the section “Obligations and equity"("Liabilities") also include costs associated with the activities of the bankruptcy trustee and his team. These new liabilities include management costs as well as the cost of holding assets until they are sold.
The difference between the value of assets (at their selling price) and liabilities + equity can be:
- positive: this difference falls on the shareholders (in reality this happens extremely rarely);
- negative: shareholders, one might say, have nothing left; obligations to the bankruptcy trustee remain unchanged, and the part that falls to the share of creditors is compressed.
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 below 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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Kinds
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 an enterprise receives as a result of the open sale of its assets over a certain 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 the sale of property;
- type and condition of property;
- market valuation of similar property;
- state of the economy this moment, 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 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 more factors, one of which is the service life, technical condition object, as well as the presence 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:
