Fair value

Of the Fair valuealso as Fair value is known, a centralised valuation concept according to the International Financial Reporting Standards (IFRS). It is the amount for which an asset could be exchanged or a debt settled between knowledgeable, willing parties in an arm's length transaction.

E-invoicing in Germany: How to implement the obligation with SAP Business One

SAP Business One uses the term "fair value" not explicit in its user interfaces or standard reports, however, supports measurement in accordance with IFRSwhich includes the fair value in certain cases. In particular, the following system functions are used for mapping:

1. measurement areas for IFRS

SAP Business One enables the creation of additional assessment arease.g. for IFRS or local standards (e.g. HGB). This allows a parallel valuation of the same asset, for example according to Acquisition costs (local) and Fair value (IFRS).

2. application to fixed assets

Fixed assets, such as Investment property (in accordance with IAS 40), can be recognised in the IFRS measurement area. Alternative to the acquisition cost model The assets are also recognised at fair value - manually via valuation adjustments and journal entries.

3. foreign currency valuation as an analogue example

SAP Business One offers a function for Balance sheet date valuation of foreign currency balances (debtors, creditors, cash and bank accounts). These valuations use current exchange rates and generate Unrealised exchange rate gains/losseswhich corresponds to the fair value principle in simplified form.

4. value adjustments and book value adjustments

In the context of asset accounting and accounts receivable valuation Manual value adjustments (e.g. in the event of sustained losses in value), which is an analogous procedure to the fair value adjustment.

5. technical realisation

Fair value adjustments are made Not automatedbut through:
- Manual journal entries,
- Utilisation of the IFRS measurement range,
- and if necessary Adjustment of residual carrying amounts with voucher note.
It is recommended, transparent booking texts and separate ledger accounts to distinguish between realised and unrealised changes in value.

Practical example - fair value measurement of a property in accordance with IAS 40:

Original valuation in the local area:
- Recognised at cost (e.g. €500,000)
IFRS measurement range:
- Market value increased → Revaluation at € 550,000
- Journal entry in the IFRS area:
```
Property (IFRS) € 50,000 to revaluation reserve (IFRS equity) € 50,000
```

summary

Even if the term Fair value is not managed by the system in SAP Business One, the valuation concept can be Manual and rule-compliant mappingespecially in the context of IFRS. By using parallel valuation areas, targeted journal entries and a clean balance sheet structure, the fair value principle can also be effectively implemented in a mid-sized ERP system such as SAP Business One.

Versino Financial Suite

the Versino Financial Suite ensures greater transparency, traceability and efficiency in the management of fair value measurements in SAP Business One. It facilitates the documentation, analysis and evaluation of all relevant postings and thus optimally supports companies in IFRS-compliant accounting - even if the fair value measurement itself is still carried out manually.