Covert self-financing

Bei der verdeckten Selbstfinanzierung (Gegenteil: Open self-financing) werden hidden reserves gebildet, sie stellen zusätzliches Eigenkapital dar, das in der Bilanz nicht ausgewiesen wird.
Hidden reserves arise, for example, from excessive provisions or undervaluation of assets due to excessive depreciation:

The silent form of self-financing has the advantage over the open form that the hidden reserves do not appear in the books or the balance sheet, while open reserves have to be formed from the taxed profit.

The hidden profit only becomes apparent when the hidden reserve is released through the sale of undervalued assets and finished products. This profit would now have to be taxed and either distributed or converted into an open reserve. A new asset always has to be valued lower, otherwise the hidden reserves will dissolve themselves.
The formation of hidden reserves is generally permitted in the interest of safeguarding and strengthening the intrinsic value of the company. The limits for this, however, are determined by the rules of the HGB (§ 252 H.).

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