Lowest value principle (SAP Business One)

That Lowest value principle is a central valuation principle of the German Commercial Code (HGB) and a consequence of the overriding principle of prudence. It stipulates how assets are to be valued in the balance sheet if their current value deviates from the original acquisition or production costs. A distinction is made between Mitigated lower of cost or market principle for the fixed assets and the Strict lower of cost or market principle for current assets. The following applies to current assets (e.g. inventories): If the stock exchange or market price on the balance sheet date is below the acquisition cost, must the lower value is recognised, even if the impairment is only temporary. For fixed assets, an impairment loss to the lower value can only be recognised in the case of a temporary impairment. expected to be permanent impairment may be recognised. This principle is intended to ensure that a company does not present itself as richer than it is and that no unrealised profits are reported. The application of these rules is an integral part of the Financial statements in SAP Business One. Advanced financial add-ons such as the Versino Financial Suite can help with the implementation and documentation of stock assessments.