Expert: Ed McFarland - 2/8/2005

Question
i bought a business and entered the assets at the purcahse price (I got a very good deal). Now I am selling the business and the value of the assets on the balance sheet does not reflect their actual value. Is there some way to adjust this value, and what would the balance entry account be? I am in Canada if that makes a difference.

Answer
The technical accounting answer is that fixed assets, except for land, depreciate and ending being worth less than when first acquired.

Now your reality, you got the assets cheap and their current value is something higher. By US standards, I would not do anything, you've had them on your books at a certain value. Is because of the assets that you are selling or the value of the business?

If it's an asset sale, get an appraisal and sell them off and never mind showing the books. If it is for the value of the business, then the revenue potential and not the assets is driving the sale.

If the real problem is the gain on the sale, then you need to find somebody with experience with Revenue Canada for that question.

Good luck.