Significance and Valuation of Current Assets in the Tax Advisory Firm

In business administration, assets intended for short-term sale or consumption are classified as current assets. Particularly in production, raw materials, auxiliary materials, and operating supplies are considered current assets. These assets are referred to as inventories in accounting, for which a physical inventory count must be conducted on the balance sheet date.

Valuation According to Commercial and Tax Law

The German Commercial Code (HGB) establishes the lower of cost or market principle for valuing current assets to protect creditors' interests. Acquisitions are generally recorded at acquisition cost, while work in progress is valued at production cost. This applies under both commercial and tax law.

Specific Characteristics of Individual Costs

- Input Tax Amounts: Deductible input tax amounts are not included in production costs unless the entrepreneur is not entitled to input tax deduction.

- Material Overhead Costs and Manufacturing Costs: Material overhead costs and manufacturing overhead costs include expenses for storage, transportation, production preparation, and more.

- Depreciation of Fixed Assets: The depreciation of fixed assets used in production is generally considered as depreciation (AfA).

- General Administrative Costs: This includes costs for management, purchasing, works council, accounting, and more.

- Expenditure for Social Facilities: Costs for the canteen, employee leisure activities, etc.

Methods for Determining Production Costs

The determination of production costs can be based on actual costs incurred, costs of normal operation, or optimal operation, depending on the level of capacity utilization. Various calculation methods such as division calculation, equivalence number calculation, and surcharge calculation can be applied to distinguish between realized and calculated costs.

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Legal status: June 2025