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Specifics of determining the value of net assets and other financial indicators in the financial analysis of entities going bankrupt

Vol. 18, Iss. 5, MAY 2019

Received: 26 September 2018

Received in revised form: 28 January 2019

Accepted: 11 February 2019

Available online: 30 May 2019

Subject Heading: Crisis management

JEL Classification: G33, M41

Pages: 974–994

https://doi.org/10.24891/ea.18.5.974

Shchepot'ev A.V. New Paradigm Consulting Group, Tula, Russian Federation
shepotevsv@mail.ru

https://orcid.org/0000-0003-3451-2947

Subject The article studies the distinguishing features of determining the value of net assets and other financial indicators of entities going bankrupt and well-functioning entities.
Objectives The aim is to perfect the tools of financial analysis and analytical procedures for bankrupt entities.
Methods The study employs the methods of analysis, generalization, synthesis, and comparison.
Results I consider adjustments to assets and liabilities, which are advisable when determining the actual financial condition of the organization. The paper substantiates the need for adjustments to assets and liabilities as there are many inconsistencies and discrepancies between accounting registers and the real financial situation of the organization.
Conclusions The paper shows in detail the difference between the principles of determining the value of net assets and other financial indicators and the coefficients of entities that go bankrupt and well-functioning entities. It also reviews potential adjustments to assets and liabilities, which should be done before conducting analytical procedures of financial analysis of the entity going bankrupt. The findings may be useful for managers, insolvency receivers, and judges during analytical procedures of the financial condition of the bankrupt entity, audits of economic entities, financial analysis of entities going bankrupt. They may be of help when identifying the signs of fictitious and intentional bankruptcy, and addressing the grounds for challenging transactions.

Keywords: net assets, hidden assets, fictitious assets, financial stability, crisis state

References:

  1. Shchepot'ev A.V. [Effect of net assets and equity on the financial stability of the organization]. Pravo i ekonomika, 2012, no. 9, pp. 24–30. URL: Link (In Russ.)
  2. Lisovskaya I.A. [Net assets calculation: new problems and solutions]. Mezhdunarodnyi bukhgalterskii uchet = International Accounting, 2012, no. 22, pp. 2–7. URL: Link (In Russ.)
  3. Shchepot'ev A.V. Metodika vyyavleniya i otsenki "skrytykh" i "mnimykh" aktivov i obyazatel'stv (primenyaetsya dlya otsenki rynochnoi stoimosti organizatsii (biznesa) [The methodology for identifying and assessing the "hidden" and "imaginary" assets and liabilities (used to assess the market value of the organization (business)]. Moscow, Yustitsinform Publ., 2009, 144 p.
  4. Kachkova O.E., Sayakhov T.R. [Comparison of concept "equity capital" in Russian accounting standards and International Financial Reporting Standards]. Mezhdunarodnyi bukhgalterskii uchet = International Accounting, 2013, no. 3, pp. 2–8. Link (In Russ.)
  5. Mikheev M.V. [Accounting (Financial) Misstatements: Cause and Effect]. Auditor, 2015, no. 12, pp. 34–38. URL: Link (In Russ.)
  6. Koryagin M.V., Kutsyk P.A. [The quality of financial statements as an information product of the accounting system]. Mezhdunarodnyi bukhgalterskii uchet = International Accounting, 2016, no. 2, pp. 34–48. URL: Link (In Russ.)
  7. Shchepot'ev A.V. [Improvement of the mechanism for monitoring compliance with the legislation that regulates the mandatory audit of bankrupt subjects]. Pravo i ekonomika, 2017, no. 7, pp. 54–57. URL: Link (In Russ.)

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