Appraising fund assets and liabilities in real value

With the amendment to accounting regulations, an obligation was laid down as of 1. 1. 2021 to appraise fund assets and liabilities in fair value (real value) following international accounting standards (IFRS).

Still prior to this change, funds had to appraise the value of their assets and liabilities regularly, i.e. to fix their net asset value (NAV). In real estate funds, the issue was solved, for instance, in the manner that an accounting firm would submit the accounting value of the assets and liabilities, real estate specialists conducted appraisals of real estates and the fund would compile this information in the NAV appraisal.

In the light of these new regulations, this method is not ideal for recording in accounting for (i) the accounting value of items cannot simply be added or subtracted to/from real estate appraisals due to the existence of mutual ties (e.g., unfinished property, future period income) and (ii) the accounting value of items (for instance, provided loans / credits, receivables) may no longer fulfil obligations according to accounting regulations if they are not appraised in fair value.

In our opinion, the most effective solution to this new situation, effective as of 1. 1. 2021, is a comprehensive NAV appraisal by which both mutual ties between accounting items and real estate appraisals (e.g. unfinished property, accrued items, deferred tax etc.) would be settled, which would therefore ensure the appraisal of all assets and liabilities in fair value (e.g. loans / credits).