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ESTIMATION OF THE COST OF ENTERPRISE IN THE CONDITIONS OF INFLATION

Автор Доклада: 
Golovko J.S.
Награда: 
ESTIMATION OF THE COST OF ENTERPRISE IN THE CONDITIONS OF INFLATION

УДК 330.133:336.748.12

ESTIMATION OF THE COST OF ENTERPRISE IN THE CONDITIONS OF INFLATION

Golovko J.S., postgraduate student

The state higher educational institution "Pridneprovsky State Academy of Civil Engineering and Architecture", Dnipropetrovsk

The results of the analysis of cost estimation of an enterprise in the conditions of inflation and substantiation of expediency and economic efficiency of estimating the cost of the enterprise are presented in the article. The classification of estimation methods is shown to be expediently to carry out according to different signs depending on the types of resource communications, the processes and the received results.

Keywords: estimate, cost,enterprise, inflation, analysis, efficiency, mechanism, process.

В статті приводяться результати аналізу умов оцінки вартості підприємства в умовах інфляції та обґрунтування доцільності та економічної ефективності проведення оцінки вартості підприємства. Показано що класифікацію методів оцінки доцільно проводити відповідно до різних ознак залежно від типів зв'язків ресурсів, процесів та отриманих результатів.

Ключові слова: оцінка, вартість, підприємство, інфляція, аналіз, ефективність, механізм, процес.

The statement of a problem and its connection with scientific and practical problems. In the conditionsof Ukraine transferring to the market relations of the professional knowledge, skills and ability of workers occupied in the diverse spheres of economy and management, in the search of correct and proved administrative approaches and decisions for increasing the enterprises, associations and other economic structures efficiency are of special value.

The property state of the economic entity is defined by the set of property rights and obligations which are reflected in the bookkeeping of its economic activities.

Economic activities in the conditions of the market, rigid competition, solving the problem of survival requires increasing the attention to accounting, control and the further economic analysis of the property state of the enterprise.

Estimation is being widely used in the modern market economy. Enterprise estimation of cost is the regulated, purposing process of definition the project costs in money terms taking into account the potential and real income which takes place in a certain time interval under conditions of a certain market.  Evaluation cost of property of the enterprise is considered to be the most difficult financial problem. The developed special techniques of a complex estimation which allow to consider in detail an enterprise state, its material and non-material assets, possibilities and development ways, and also the existing threats can give estimation not only to separate structural units, but to a company as a whole.

Necessity of the estimation arises in case if: there is the necessity to estimate and overestimate the basic assets, to make revaluation of the enterprise assets at  fair value, to transfer completion of the estimation done before for a new date, to solve a question, connected with the antimonopoly law; the necessity of the agreement conclusion economic contracts; if the enterprise registers property on pledge for obtaining credit or investment; somebody leases or buys the state property; intends to use property as the Authorized capital of the enterprise; has no corresponding documents on the property he owns; desires to put it on the enterprise account; the enterprise is forced to pay off the debts by property, or the debt to the enterprise is paid  by property; the enterprise is undergone to the procedures of reorganization, liquidation, bankruptcy; smb. intends to open business; or it is necessary to estimate comprehensively efficiency of the future investments to define expediency of realization of the given concrete project [13].

For this reason the account of property and estimation of value of the enterprise in the conditions of inflation is quite actual for the present day.

The analysis of the latest researches and publications.The general evolution of methodology of research and estimations of the enterprises can be divided into two parts - a stage of spontaneous development and a stage of scientific segmentation [6]. Each of them testifies to different level of economic consciousness of economists-experts. For example, the first stage is characterized by an indistinct formulation of a research subject though the scientists and businessmen-experts have already understood the necessity of creation of qualitatively new mechanisms of management which would give the chance to connect the domestic experience of planning the enterprise activity to the modern social and economic prospects (possibilities). Creation of mechanisms of such type is possible only on the basis of the account of hereditary character of the cycles of economic systems development. Within the limits of this stage etiological and resource approaches to understanding of potential prevailed which testified first of all of insufficient level of theoretical processing of a problem.

With deepening theoretical researches and their direction to disclosing the possibilities of social and economic systems of the enterprises, and also with accumulating the sufficient volume of an empirical material the stage of scientific segmentation has been formed. There is the prevalence of different conceptual postulates concerning the essence of estimation throughout certain time an interval is characteristic for it. If within the limits of the first stage the scientists proceeded from the intuitive understanding of the concept "estimation", researchers of the second stage defended clearly the segmented scientific hypotheses. In general, all scientific works with the problem of definition the estimation of separate enterprises or social and economic systems of different levels can be divided into four general groups - resource, relative, target and expert.

In scientific works on the problems of formation and realization of the enterprises potential the question of measurement of its size and level of use efficiency is usually insufficiently developed. The great variety of diverse thoughts is expressed concerning approaches to the estimation of the enterprise potential, in particular concerning the officer estimation principle: by means of the general (global) indicator or system of indicators[12].

In theoretical dispute concerning a question of efficiency estimation of economic system activity we divide the opinions of the group of researchers headed by N.A.Hrush, B.P.Plishevsky, G.M.Sorokin whether by means of the general synthetic indicator or by means of group, systems of indicators [5].

For today, in the conditions of inflationary economy, the enterprise estimation of cost demands the increasing application, as each day the great variety of enterprises stop their activity not by their own desire. Therefore it is necessary to develop and improve methods of property estimation which for present conditions are not effective.

Considerating the inflation we addressed the works of such scientists, as J. M.Keynes, M.Fredmen.

The aim of the article is the analysis of conditions of the enterprise cost estimation in the conditions of inflation and a substantiation of expediency and economic efficiency of carrying out the enterprise cost estimation.

Material statement. The mechanism of estimation process, according to the Law of Ukraine "About the estimation of property, property rights and professional estimated activity in Ukraine" of July, 12th, 2001, is regulated by the National Standard № 1 "the General bases of the estimation of property and property rights" and includes the following procedures [4,1]:

1. A preparatory stage.

2. The contract conclusion for carrying out estimation.

3. Acquaintance with the object of estimation, collecting and processing the initial data and other information necessary for carrying out the estimation.

4. Identification of object of estimation and the rights connected with it, the analysis of possible restrictions and cautions which can accompany the procedure of carrying out the estimation and the use of its results.

5. A choice of necessary methodical approaches, methods and estimated procedures which satisfy the purposes of estimation and the selected base, defined in the contract for carrying out estimation and their application.

6. The coordination of the results of estimation received with application of different methodical approaches.

7. Compossing the report on property estimation and conclusion on the project cost for the estimation date.

8. Completion (actualization) of the report and conclusion concerning the project cost for a new date.

The estimation is a result of definition and analysis of qualitative and quantitative characteristics of the object being operated, and also its management. The estimation gives the chance to establish, how the enterprise works, whether the set aims are achieved how the changes and improvement in managerial process influence the full use of the enterprise potential, its efficiency [3].

One of the contradictions characteristic for the Ukrainian economy of today is on the one hand, the necessity of objective estimation of cost of the enterprise by the methods which answer the market economy nature (that is important for development of the market relation), and on the other hand the absence of necessary conditions for application of these methods in practice [12]. Besides, its instability is distinctive line of the Ukrainian economy today. Risks which domestic businessmen face, much more exceed the average values, characteristic for the countries with the developed market relation. Situation increases the inflationary process which leads to the fact that insignificant information, which can be received for the enterprise estimation of cost, reflects business in "distorting mirrors". Inflationary processes in such a way affect the state of the enterprise [8, 11]:

The cost of enterprise property is redused.

Cost commodity-material inputs and expenses for amortization are reduced which causes, on the one hand, profit increase and on the other hand - unjustified decrease of the cost price of the realized production.

Accumulation of money by the enterprises for capital investments as a result of their "erosion" becomes impossible.

As the enterprise aspires to keep real level of payment of work, it leads to "decumulation" of turnaround circulating and poor investment resources and to domination of short-term interests of an enterprise, to growth of fund consumption and to reduction of fund accumulation.

Cost price reduction implies incomplete compensation of the real sum of current expenses and an enterprise gain.

Increase of financial results with the decrease of cost of assets generates unreasonable increase of  profitability indicators.   

Therefore taking into account the level of risks and inflation it is expedient to apply methods of the enterprise cost of estimation in domestic economy which allows considering these factors.

The either choice approach and a method of estimation of the enterprise cost is defined by the purpose and estimation function and also peculiarities of the estimated enterprise [2]. If the estimation is carried out for the purposes of the insurance taxation, it is expedient to choose the property approach based on the estimation of the enterprise property cost. If it is for its sale –then it is one of the methods based on the estimation of profitability of the enterprise, or the methods based on the comparative approach. The choice of a method of the enterprise estimation depends also on the enterprise size. For example, to estimate a small enterprise a method of discounting of the future income is inexpedient, as this method is applicable basically for the estimation of the big enterprises (at a stable economic situation). The choice of a method of estimation of the enterprise cost depends on the estimation function that is how this estimation will be used: either for the establishment of the size share in the society with limited liability, or for judgment performance at enterprise liquidation, or for pledge substantiation, establishment of a project cost of privatization etc. However it does not mean that for enterprise estimation cost it is necessary to apply only one of the selected methods. Other methods should be used for acknowledgement of the results received by the basic selected method. As it was already said, in the conditions of inflation it is impossible to use balance cost as a criterion of the enterprise estimation. It is necessary to correct the cost of assets for inflation percent. A method of the corrected net balance cost estimation is the most suitable for definition of the bottom border of the price of the operating enterprise [10]. Reproduction cost in the present conditions also cannot be used for estimation, as a considerable part of the equipment in our country has morally and physically become outdated, and there where the market of the old equipment is the smallest, market price definition on analogues represents certain difficulties. As the minimum (bottom) border of the enterprise price which in the foreseeable future will probably become the bankrupt, it is expedient to use a method of liquidating cost. In the process of market development the information about real estate market prices, equipment and other assets will be accumulated. At present it is useful to carry out the comparative analysis of market position of different enterprises [9]. The basic elements of this analysis are research of commodity markets and a financial state of an enterprise. The cost of net assets specially corrected, says much about profitability of the enterprise and, so, is the main criterion of estimation. Therefore methods which are based on net profits are the most perspective for enterprise estimation of cost. The use of net profits received by the enterprise in past, is hardly expedient due to the radical breakingof external economic environment in which the enterprise functions. The conclusion is as follows: it is possible to use the past as base for enterprise cost estimation only after a corresponding correction. Backwardness of the capital market in Ukraine makes it difficult to use a method of capitalization of the net profit. Both the proprietor, and the investor are interested first of all in net profits in the future, therefore in the presence of the necessary information the most perspective are the methods of the enterprise estimation on the basis of the future monetary streams brought to present. As it was noted above the standard technique of the enterprises property cost estimation operating in Ukraine leads to misrepresentation of the objects cost privatized by the repayment. Considerable rupture between initial and a sale price of the enterprises testifies it. In particular many disputes are caused today by the absolute size of estimation of the whole object. As a rule, the seller suspects the expert in understating estimation, and the buyer - in overestimating it. If sale was carried out constantly and on great variety of objects with a considerable quantity of sellers and buyers this problem would not exist. But in the course of privatization it is a condition: there is no simultaneous sale of great variety of objects to great variety of buyers [11].

According to the international standards the enterprise cost estimation is an act or a process of conclusion formation of the estimator and calculation of the enterprise cost, a complete property set or the rights connected with it.

In the National standard №1 "the General principles of property estimation and property rights" [4] it is specified, that the choice of methods of estimation depends on presence of information about the expected incomes from the use of estimation object, stability of their reception, the estimation purpose, and also the kind of cost which are subject to definition.

Conclusions. Thus, on the basis of above said the estimation answering the question what real current cost exists at present is developed. Creditors; investors; the state; shareholders; managers; suppliers; insurance firms are interested in the estimation of the enterprise potential. They wish to realize the economic interests and define the main aims of estimations. Therefore taking into account a rate of inflation in domestic economy it is expedient to apply methods of the enterprise cost estimation which allow to consider this factor and  for this reason the classification of methods of estimation is carried out according to different signs depending on the types of communications of resources, processes and the received results.

Literature:

  1. Закон Украины «Об оценке имущества, имущественных прав и професиональной оценочной деятельности в Украине» от 12.07.2001г. №2658-3.
  2. Постанова Кабінету Міністрів України «Про затвердження методики оцінки майна» від 10 грудня 2003 р. № 1891.
  3. Международные стандарты оценки //www.appraiser.ru
  4. Национальный стандарт №1 «Общие принципы оценки имущества и  имущественных прав» - постановление КМУ «Об утверждении Национального стандарта №1 1 «Общие принципы оценки имущества и  имущественных прав» от 10.09.2003г. №1440.
  5. Азгальдов Г.Г. Проблемы согласования оценок и их возможное решение / Российское общество оценщиков //Вопросы оценки. – 1999. -№4. –с.32-38.
  6. Болдырев В.С., Федоров Л.Е. Введение в теорію оценки недвижимості. –М.: Азбука, 1997. -180 с.
  7. Григорьев В.В., Островки И.М. Оценка предприятий. Имущественный поход: Учеб.-практ. Пособие. – М.: Дело, 1998. – 224с.
  8. Петрик О.Інфляція в Україні: проблеми, перспективи, ризики //Вісник НБУ. – березень 2007. – с.2-8.
  9. Покропивний С.Ф. Підприємництво: стратегія, організація, ефективність. -  К:КНЕУ, 1998, С.24
  10. Поляков А.С., Полякова О.А., Цыганок Я.А. Оценка стоимости имущества или с чего его начать. – Донецк: 1995. - 35с.
  11. Рєзникова Н. Про специфіку фінансової кризи в Україні // Персонал. – 2006. - №3. – с.84-89.
  12. Рєпіна І. М. Підприємницький потенціал: методологія оцінки та управління // Вісник Української академії державного управління при Президентові України. — 1998. — № 2.С. 262—271.
  13. Федонін О.С., Рєпіна І.М., Олексюк О.І. Потенціал підприємства: формування та оцінка: Навч. Посібник. – Вид. 2-ге, без змін. – К.: КНЕУ, 2006. – С. 168-195.
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