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In October 2015, the Voranschlags- und Rechnungsabschlussverordnung 2015 (VRV) entered into force. This will lead to the introduction of a new budgetary law and will also require an account for all Austrian municipalities from 2019-2020.

What is to be evaluated?

The calculation of the value is aimed at both the collection of assets and the collection of the debts of a municipality. The following is an overview of the most important items in the financial statements, which must also be assessed.

Assets:

• Intangible assets, e.g. acquired licenses
• Property, plant and equipment such as Land, infrastructure, buildings, water and drainage buildings, special equipment, technical equipment, vehicles, machinery, cultural assets, down payments, equipment under construction
• Financial instruments including derivatives
• Investments, receivables, inventories, cash and cash equivalents

Liabilities:

• Long-term liabilities (financial liabilities, lease obligations, provisions)
• Short-term liabilities (financial liabilities, liabilities, provisions)

How to evaluate and how do I get an initial evaluation?

Municipalities are obliged to record assets. The rules and models for this are currently not yet final. For this reason, we will be very close to tried and tested procedures in the area of private companies and industries. As a rule, the principle of the individual valuation of all assets exists, whereby, in exceptional cases, fixed value procedures can also be used.

The following terms play a role in determining the value propositions:

• Acquisition costs or production costs
• Depreciation (scheduled / non-scheduled)
• Net Present Value
• Fair value

…please read on…FRC-Finance & Risk Consult GmbH

About the author, Heinz Hofstaetter – Over 20 years of international experience in senior management positions in the areas of consulting, banking, finance, asset management, valuation and Real Assets.

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