The bankrupt entity’s assets valuation methods: Polish approach

  • Received June 25, 2019;
    Accepted September 30, 2019;
    Published October 7, 2019
  • Author(s)
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  • Article Info
    Volume 16 2019, Issue #3, pp. 319-331
  • Cited by
    3 articles
  • Funding data
    Funder name: National University of Water and Environmental Engineering, Ukraine
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The assets of a business entity that is subject to bankruptcy proceedings form bankruptcy estate. The correct assessment of its value is a necessary pre-condition to save time and cost effective bankruptcy proceedings. The article presents the valuation methods applied in Poland for assets consisting of real estate and movables that collectively constitute the bankruptcy estate. The main objective of this study is to assess the reliability and efficiency of the appraisals of book, market and forced sale value in relation to the possibility of correct estimation of funds obtained from the sale of individual assets in the course of liquidation proceedings. The article presents the results of a study conducted in 15 intentionally selected enterprises in bankruptcy operating on the territory of Lubelskie Voivodeship in Poland. It offers the analysis of applied valuation methods and the description of specific conditions of sale of bankrupt entity’s assets in accordance with legal regulations and applied practices. In particular, it compares the differences in the value of the examined assets determined by different methods and identifies the reasons for these differences. The most important conclusion of the study is the fact that neither the market value nor the book value allow for reliable estimation of the revenues that could be obtained from the sale of the bankruptcy estate, which makes it impossible to determine the probable level of satisfaction of creditors’ claims. The specific nature of sale under bankruptcy justifies the use of the forced sale value despite difficulties connected with its estimation. The basic recommendation is the necessity to supplement the valuation report with the estimation of the forced sale value along with the comprehensive description of the algorithm of its calculation.

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    • Table 1. Balance sheet value of assets and liabilities of the examined entities as at the day preceding the declaration of bankruptcy
    • Table 2. Methods of valuation of real estate comprising the bankruptcy estate of the examined entities
    • Table 3. Valuation of real estate comprising the bankruptcy estate in the examined enterprises
    • Table 4. Valuation of movable property comprising the bankruptcy estate in the examined enterprises