Net worth

Net assets ( engl. net worth, net assets) in the financial accounting the positive difference between the amounts shown on the asset side of the balance sheet assets ( gross assets ) and the amounts shown on the liabilities side, liabilities of a company.

General

The net assets (including net assets ) corresponds in this form to equity, which represents the residual amount in the balance sheet. To net assets - and equity - all profit shares will be added to the distribution of which have finally dispensed with the shareholders. Not to equity and net assets are the amounts accrued from profits. These reduce the net worth because they are counted as liabilities. However, the term net worth appears not only in business but also in other asset entities.

Use of the term

The term net assets is used in different sub- areas of daily life.

Right

Net worth is a legal term which occurs in various areas of law ( eg § 92 GenG). In the absence of a legal definition, it is a vague legal term. Also, the Federal Administrative Court defines it as a residual between gross assets and liabilities. In the capital maintenance rules, it is important that in the GmbH for purposes of creditor protection, the protected assets may not be distributed to the shareholders. This requires that the capital stock with the social net assets must be compared.

In bankruptcy law, the bankruptcy petition obligation depends on whether at all is still a social net assets available. If the net assets in the insolvency status is negative, an insolvency reason is independent in front of a positive or negative going concern assumption. No bankruptcy petition obligation reversed with a positive net worth and negative survival prognosis and positive net worth and positive prognosis.

Assets carrier are out of legal persons and natural persons. In the latter case, the net assets are defined similarly. Of total assets ( as an inheritance ) the hereupon burdensome debts ( debts under ) are deducted to obtain the net assets left for the determination of the taxable value. In the marital community of surplus, the gains from the initial and final wealth of each spouse is calculated. Both conceptions of wealth and start from the net assets, because the law requires the deduction of debts ( § 1374 para 1 BGB).

Financial Accounting

When companies purchase the net assets is one of the essential bases for calculation of the purchase price for an entire company. The law speaks of the " fair value of assets and liabilities " (§ 246 paragraph 2 sentence 3 HGB). If the purchase price actually paid over the net assets identified, it is a "goodwill", conversely, a " negative goodwill ". According to the rules on the treatment of "goodwill" on the balance sheet of the acquiring company only the amount exceeding the net worth of the purchase price part is capitalized and subject ( § 246 paragraph 1 sentence 4 HGB). The " negative goodwill " as " negative goodwill " to the net assets shall be declared negative earnings outlook or " lucky buy " and passivate 3 HGB as a provision in accordance with § 301 para ( " goodwill from capital consolidation " ), that reduces under otherwise constant conditions the net assets of the acquiring company. This provision may only be resolved if either the expected unfavorable earnings trend has occurred or is determined at the balance sheet date indicate that the negative goodwill corresponds to a realized gain ( § 309 section 2 HGB, IAS 22.61 et seq.)

Net assets increased by increases in equity or retained earnings with otherwise unchanged balance sheet ratios and vice versa. Net worth is liability carrier for the losses and liabilities. Zehren the losses, the net assets completely on, it comes to over-indebtedness as a reason for insolvency.

Economics

The National Accounts ( SNA) is based on an asset account that the economic wealth objects ( real assets and receivables), the liabilities and the balance identifies the net assets. As part of the balance sheet, the national wealth is defined as the sum of all net assets within an economy. The European System of National Accounts (ESA ) is analogous to the preparation of the balance sheets the assets ( non-financial assets and receivables) liabilities, liabilities, opposite. The balance is the net worth. This is referred to the economy as a whole and the national capital.

Net assets and liabilities

Lenders, especially banks that grant loans only on the basis of existing assets. The acquisition of assets (real estate, motor vehicles ) is not fully credited as a rule, because at a forced sale of the original purchase price can not be achieved and the interest burden is too high. Therefore it can be assumed normally assume that the debt only a fraction of the assets make up, so that positive net worth is available at the asset entities. From a negative net worth or negative net assets is called, however, if at asset entities the debt are higher than the total assets; then there is indebtedness.