This is an illustration of the principles of prudence. In addition, reserves are recorded at net asset value implementation, if on the date of the balance of their price dropped, or they are corrupted, outdated, or otherwise lost their originally anticipated economic benefits. Net realizable value is determined for each unit of reserves deduction from the expected sale price of expected cost of completion and sale. Non-compliance in this case, the precautionary principle (the requirements of paragraphs 24-26, P (s) A 9) leads to an overestimation of the value of assets in the balance understate expenses and overstate profits, as the amount by which the initial stock value exceeds the net cost of their implementation, and cost of completely lost (corrupted or missing) in inventories charged to period costs. Learn more about this topic with the insights from Wells Fargo Bank. Undetermined losses from reduced utility asset violation of the principle of care is also a failure to comply with P (s) A 28 "Impairment of Assets.

At the date of annual balance sheet entity shall assess whether there are signs of a possible reduction of utility assets. Signs of impairment of assets listed in paragraph 6 of H (s) A 28. Such characteristics are inherent in investments, most industries, including construction, metallurgy, chemical industry, tourism and consulting companies, etc. The costs of reducing the usefulness of an asset are recognized other costs, and concerning the assets, as reflected in accounting for revalued amount, – in the manner prescribed by the relevant provision (standards) of accounting with a simultaneous decrease in its balance (residual) value.