The silence Self-financing is achieved through the creation of hidden reserves that cannot be seen in the balance sheet, provided that these are covered by profits. Hidden reserves are capital reserves that owe their creation to a positive difference in value between the daily procurement value and the book value, whereby the book value is assumed to be zero for non-capitalized goods.
The silent self-financing takes place through conscious accounting acts and / or conscious valuation acts, whereby liquid funds are tied up in the company without appearing as profit beforehand:
By undervaluing assets, e.g. B. through excessive direct depreciation, non-capitalization of capitalizable expenses, too low approaches to current assets.
By overvaluing the liabilities, e.g. B. by excessively high provisions, which, depending on the level of provision, can be short-term to long-term sources of finance and / or prepaid expenses, which mostly contain short-term hidden reserves.
It is important for the company to know how long the funds tied up in the company through silent self-financing can be used for financing purposes. Accordingly, a distinction must be made between permanent, long-term, medium-term and short-term hidden reserves.
Formation of hidden reserves
With the formation of hidden reserves, the company's profit is initially reduced, its dissolution is effected after a certain time, but its increase, that is, profit payments are not avoided, but only postponed to later periods. For this reason, current advantages must be weighed against future disadvantages.