Long term tangible assets valuation and taxes in Latvia

Laws and regulations define that every enterprise determines the accounting order of its assets. Initially, the long term tangible assets are to be evaluated in accordance with the initial accounting value. Very often there may emerge situations, when in the process of using of long-term tangible assets their book value is no more adequate to their fair value or market value. Such inadequacy may create a wrong image about the asset fair value to the users of finance statements. In such case, it becomes necessary to revaluate the assets. The majority of enterprises in Latvia do not carry out the revaluation, and in their accounting there are long term tangible assets without a residual value, and, therefore, the balance sheet assets do not reflect the actual value of the respective period, and production costs and services do not reflect the actual expenses. The revaluation of long-term investments is related to corporate income tax and immovable property tax. Practically, it means that the taxable income becomes increased through the difference of these both depreciations, because the depreciation sum of the fixed assets, indicated in the yearly report of the enterprise, will be considerably larger than the depreciation calculated for the needs of taxation, as the revaluation has been taken in account.