Lowest Value Principle

Lowest Value Principle in English 2


Fixed assets

According to Section 247 of the German Commercial Code (HGB), fixed assets include all items that are used permanently for your business operations. This means all items that are firmly bound in the company and are permanently created. This can be, for example, machines, land or vehicles. A distinction is made between three categories of fixed assets.

  • 1. Category: Intangible assets such as goodwill, down payments made, licenses or rights acquired by you in return for payment and also industrial property rights created by you yourself.
  • 2. Category: Tangible assets such as machines and systems, land or the equipment of a company or business.
  • 3rd category: Financial assets such as participations, shares in other companies affiliated with your company, securities from fixed assets, etc.

The current assets

Current assets are part of the total assets of your company. The term current assets is used as a collective term for assets that are only used briefly for your business operations. In the Prepaid these items are not to be regarded as posts. The following items belong to the current assets.

  • Securities and balances with banks or other credit institutions
  • Checks and cash in hand
  • Other assets and receivables
  • Stocks

What does the precautionary principle mean?

As already mentioned in the definition, the lowest value principle is derived from the principle of prudence . But what does this precautionary principle mean? It is considered a principle in the context of proper bookkeeping. From this, in turn, four evaluation principles can be derived.

  • Realization principle
  • Imparity principle
  • Lowest value principle
  • Maximum value principle

The precautionary principle is therefore a principle that is overriding and can be implemented in practice using the sub-principles mentioned.

principle description
Realization principle This principle stipulates that you can only show profits if they have already been realized on the balance sheet date. This can be the case, for example, through an actual sale of assets.
Imparity principle This principle stipulates that impending losses or unrealized gains are to be treated differently. Translated, the word imparity means inequality. For you, it means that you cannot add profits to your balance sheet early on. On the other hand, you have to include losses in the balance sheet at an early stage.
Lowest value principle The lowest value principle means that of at least two values, the lowest value must always be included in the balance sheet. The value must or may be taken. This means that you can use the lowest value with the moderate lowest value principle, and with the strict lowest value principle you have to use it.
Maximum value principle The highest value principle is the exact opposite of the lowest value principle. This principle tells you to always use the highest value when selecting several values.

The lowest value principle in the tax balance sheet

With regard to the lowest value principle, the following rules apply in the tax balance sheet .

Regulations for fixed assets

  • If, due to an expected permanent decrease in value, a partial value results that is lower than the ongoing acquisition costs or production costs, you can apply this according to ยง 6 I No. 1 sentence 2 EStG .
  • An impairment is expected to be permanent if the partial value is below the residual book value after at least half of the remaining useful life.

Regulations for current assets

  • If there is a partial value that is lower due to an expected permanent decrease in value, you can apply this.
  • An impairment is expected to be permanent if it persists until the day the balance sheet is drawn up.

When is a write-up requirement necessary?

In the context of the lowest value principle, the option of a write-up requirement must also be observed. This bid concerns an increase in the book value that applies to assets that arose due to the absence of reasons for unscheduled depreciation. In order to be able to make a recovery order, you must meet the following requirements.

  • You have depreciated a certain asset in previous periods .
  • There are no reasons.
  • The omission of the reasons for the depreciation became known.


The lowest value principle is used to value the assets of your company. For your fixed assets, however, the moderated lower value principle applies. With this there is a choice for you. The strict lowest value principle applies to current assets. There is no choice here. That means you always have to use the lowest value on the balance sheet. Since 2009 and the reform of the Accounting Law Modernization Act , the extended lowest value principle is no longer applicable.

Lowest Value Principle