Assessment of Operating Properties According to HGB: A Guide to Maximizing Balance Sheet Accuracy
Is the valuation of your business property due and you fear complex HGB regulations? An incorrect valuation can lead to hidden costs or excessive tax payments of up to 30%. This guide will show you how to correctly assess business properties according to HGB and avoid financial disadvantages.
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The topic briefly and concisely
The valuation of business properties according to the German Commercial Code (HGB) is strictly based on the acquisition cost principle (§ 255 HGB), not on the market value.
The strict principle of lower value requires an extraordinary depreciation to the lower value in case of permanent impairment (§ 253 HGB).
Only the building is depreciated as planned; the land value remains unchanged, which requires a correct allocation of the acquisition costs.
The correct accounting of business premises is a central task for every company in Germany. The valuation of business properties according to HGB follows strict, caution-oriented rules that significantly differ from the often-cited market value. Errors when applying the cost or lower-of-cost-or-market principle can considerably distort asset representation and lead to unexpected financial burdens. We explain the crucial valuation principles according to §§ 253, 255 HGB, outline the correct approach, and elucidate how digital tools can help ensure precise and legally compliant valuation.
Fundamentals of HGB valuation for commercial properties define
A business property is, in accordance with § 99 BewG, real estate serving a commercial enterprise. The allocation to business assets is determined based on income tax principles and depends on the extent of use. If a property is used for business purposes more than 50%, it is entirely considered necessary business assets. The valuation according to the HGB is based on the prudence principle, meaning that assets should generally be assessed more conservatively, rather than overly optimistically. This protects creditors from unrealistic profit declarations. The basis for this is the acquisition cost model, which we will examine in detail in the next section.
Apply the cost principle as a foundation
The starting point for any valuation under the German Commercial Code (HGB) is the acquisition costs according to § 255 HGB. These are not comprised solely of the purchase price. Rather, all costs incurred to bring the property to an operational state must be added. An incorrect calculation can distort the balance sheet entry by up to 15%. Correct determination is crucial as it forms the basis for future depreciation. A detailed breakdown of costs is therefore indispensable.
The following items are included in the correct calculation of acquisition costs:
The net purchase price of the land and buildings.
Additional acquisition costs such as land transfer tax (depending on the federal state 3.5% to 6.5%), notary fees (about 1.5%), and land registry fees (about 0.5%).
Costs for development or surveys.
Subsequent acquisition costs, for example, due to substantial extensions.
All purchase price reductions such as discounts or rebates must be deducted.
This precise distribution is a prerequisite for the correct activation in the balance sheet and the subsequent scheduled depreciation of the building component.
Accurately represent the consumption of value through scheduled depreciation
While land is not subject to scheduled depreciation according to the German Commercial Code (HGB), the building situated on it has a limited useful life. According to § 253 HGB, the acquisition or production costs of the building must be allocated over its normal useful life. For commercial buildings completed after 31 March 1985, a standard linear depreciation rate of 3% per year generally applies. An incorrect allocation of purchase costs between land and building directly leads to incorrect depreciation amounts. This can distort the annual financial results for many years. Accurate separation is one of the most common challenges in the valuation of land and buildings. Next, we will consider unforeseen impairments.
Observe the strict principle of lower value in case of impairments
The HGB requires a cautious valuation and protects against excessive balance sheet valuations. If the value of a fixed asset property is likely to permanently fall below its book value, an unscheduled depreciation to the lower fair value must be made (§ 253 para. 3 HGB). This can be triggered, for example, by structural damage or a negative market development in the property's environment. A failure to make a fair value adjustment can lead to an overstatement of company assets. The challenge lies in objectively proving a 'likely permanent' impairment. Here, a professional, data-based analysis can be crucial to justify the need for depreciation to auditors. The determination of market value according to HGB follows its own rules. These regulations differ significantly from international standards.
Understanding the distinction from IFRS valuation
For internationally operating companies, understanding the differences between HGB and IFRS is crucial. While the HGB is strictly based on the cost model and the principle of prudence, IFRS 16 allows for fair value measurement (revaluation model). In this case, the property is accounted for at current market value, leading to higher but also more volatile valuations. Value increases can be recognised in profit under IFRS, which is unthinkable under HGB. These differing philosophies result in significantly different balance sheet figures. Detailed knowledge of the difference between IFRS and HGB is essential for investors and internationally positioned companies. However, there are also pitfalls within the HGB.
Mastering pitfalls and disclosure obligations in practice
In practice, there are several pitfalls when evaluating business properties under HGB. A common mistake is the insufficient documentation of ancillary acquisition costs, which leads to a too low activation value. Another point is the correct handling of major repairs, which are often mistakenly activated as subsequent acquisition costs instead of being recorded as maintenance expenses. Moreover, the HGB appendix requires detailed information on the accounting and valuation methods applied. These disclosure obligations in property valuations serve transparency for external financial statement readers. To avoid these mistakes and ensure audit-proof documentation, modern tools are recommended.
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The complexity of HGB regulations requires the utmost care and precision. Manual evaluations are not only time-consuming but also prone to errors. An AI-powered evaluation software like the one from Auctoa can significantly simplify and secure this process. Our tools analyze over 1,000 data points to ensure that all components of acquisition costs are correctly recorded and allocated. This reduces the risk of booking errors by up to 90% and creates audit-proof documentation. Do you need a quick and neutral assessment for your accounting purposes? The Auctoa ImmoGPT chat can provide an initial orientation, or you can request a non-binding evaluation directly. This ensures that your accounts not only meet legal requirements but also present a true and fair view of your financial position.
Conclusion: Precision as the Key to HGB-Compliant Evaluation
Welche Kosten zählen zu den Anschaffungsnebenkosten eines Grundstücks?
Zu den aktivierungspflichtigen Anschaffungsnebenkosten gehören alle einmaligen Aufwendungen, die beim Erwerb anfallen. Dazu zählen insbesondere die Grunderwerbsteuer, Notar- und Gerichtskosten für die Beurkundung und Grundbucheintragung sowie Maklerprovisionen.
Muss ich eine Immobilie nach HGB auch unter dem Anschaffungspreis bewerten?
Ja, das ist zwingend erforderlich, wenn eine dauerhafte Wertminderung vorliegt. Das strenge Niederstwertprinzip (§ 253 Abs. 3 HGB) verlangt in diesem Fall eine außerplanmäßige Abschreibung auf den niedrigeren beizulegenden Wert (Teilwert).
How do I determine the building share of the total acquisition costs?
The allocation of acquisition costs to land and building must be carried out using a recognized method. In practice, the Federal Ministry of Finance's guide for purchase price allocation or an expert report is often used to determine a realistic ratio.
What is the difference between maintenance expenses and subsequent acquisition costs?
Maintenance expenses are for upkeep and are immediately recorded as expenses (e.g., repairing a heater). Subsequent acquisition costs significantly increase the value or the useful life of a building (e.g., adding another floor) and are added to acquisition costs and depreciated over the remaining useful life.
Can I reverse an extraordinary depreciation later?
Yes, if the reasons for the extraordinary depreciation cease to exist, the HGB mandates a reversal (§ 253 Abs. 5 HGB). The property must then be written up to a maximum of the continued acquisition costs.
How does Auctoa assist me with HGB valuation?
Auctoa supports you with AI-driven analyses to create a precise and comprehensible data basis for your valuation decisions. Our tools assist with documentation and can provide indications of impairments, facilitating the application of the lower of cost or market principle and ensuring audit security.
Additional useful links
Wikipedia provides a general overview of fixed assets.
Gesetze im Internet contains the legal text for § 253 HGB, which regulates the valuation of assets.
Gesetze im Internet contains the legal text for § 255 HGB, which defines acquisition and production costs.
Haufe offers a comprehensive overview of the valuation of fixed assets according to HGB, IFRS, and tax laws.
Westphal WP explains the basics of asset accounting according to HGB.
Steuerkurse.de covers the valuation of fixed assets in the context of tax balance law.
NWB offers a detailed database entry on the topic of fixed assets.
firma.de provides practical advice on the evaluation and activation of fixed assets.
Juhn illuminates the valuation regulations for subsequent valuation in commercial law.
FAQ
What costs are included in the ancillary acquisition costs of a property?
The acquisition-related ancillary costs that must be activated include all one-time expenses incurred during the purchase. These include, in particular, the real estate transfer tax, notary and court fees for the notarization and land register entry, as well as broker commissions.
Do I have to value a property below the purchase price according to the German Commercial Code (HGB)?
Yes, this is mandatory if there is a permanent impairment of value. The strict principle of lower value (§ 253 para. 3 HGB) in this case requires an extraordinary depreciation to the lower fair value (partial value).
How do I determine the building's share of the total acquisition costs?
The allocation of acquisition costs for land and property must be carried out using a recognized method. In practice, the aid of the Federal Ministry of Finance for purchase price allocation or an expert's report is often used to determine a realistic ratio.
What is the difference between maintenance expenses and subsequent acquisition costs?
Maintenance expenses are for upkeep and are immediately recorded as expenses (e.g., repairing a heating system). Subsequent acquisition costs significantly increase the value or useful life of the building (e.g., adding another floor) and are added to the acquisition costs and depreciated over the remaining useful life.
Can I reverse an unscheduled depreciation later?
Yes, if the reasons for the extraordinary depreciation no longer apply, there is a requirement under the German Commercial Code (HGB) for a write-up (§ 253 para. 5 HGB). The property must then be written up again to a maximum of the continued acquisition costs.
How does Auctoa help me with HGB valuation?
Auctoa helps you create a precise and traceable data foundation for your valuation decisions through AI-driven analyses. Our tools assist with documentation and can provide indications of impairments, facilitating the application of the lower of cost or market principle and ensuring audit compliance.
