Accounting law: The observable market price

Rechnungslegungsrecht: Der beobachtbare Marktpreis

The new accounting law now provides for a distinction between a primary and a subsequent valuation of assets. This concept is responsible for ensuring that the assets may be carried at an “observable market price”. So far, only the purchase price had been allowed as the maximum value of these balance sheet items.

The new distinction is:

At their initial recognition, the assets shall not be valued above purchase or production costs. Subsequent valuation Assets may not be valued higher than the purchase or production costs. Individual types of assets such as inventories or assets with observable market prices are an exception.

Consequences of assets with an observable market price

  • In their subsequent valuation, assets with an observable market price may be valued at the market price applicable on the balance sheet date.
  • This valuation is to be indicated in the annex.
  • If assets are valued at market price on the balance sheet date, it is permitted to charge a value adjustment to the income statement to take fluctuations in price development into account.

The term “observable market price” must be handled with care. An observable market price exists, as long as the respective “market” is subject to prudential regulation. “Eurotax” for vehicles would not be likely to withstand a revision. It is not recommended to exhaust the interpretation of the observable market price, particularly as those appreciations are not of operation-related origin.