Abstract

Purpose: The purpose of this article is to present the findings of the author’s own studies on the
influence of owner-occupied property valuation by historical cost on fixed assets value of entities
at risk of bankruptcy.

Methodology: As part of the implementation of the study, objective desk research was carried out.
Empirical research was carried out on a group of 100 companies on which the courts had declared
bankruptcy. The study sample constituted 14% of all bankruptcy cases in 2011 and was a significant
representation of the national phenomenon.

Findings: The findings indicated that historical cost values of owner-occupied properties in most
cases are significantly lower that estimated fair value when business activities continuation is
threatened. The historical cost valuation also does not provide useful information about the market
value of property, plant and equipment of entities at risk of bankruptcy that do not possess real
estate.

Research limitations/implications: Information about market value of fixed assets of entities at
risk of bankruptcy is essential in making the decision to begin bankruptcy proceedings and estimating
the ability to repay debts to creditors.

Originality/value: The results are a part of the author’s own study concerning assets valuation
when business activities continuation is threatened. The results emphasize the role of fair value
estimation of property, plant and equipment when an entity is at risk of bankruptcy.

Keywords