COST EVALUATION OF EXISTING PRODUCTION

Abstract

The issues of cost evaluation of existing production have been in the focal point while in transit to market economy. The article analyses the notion of “the cost of existing enterprise” (CEE) defined in scientific literature and official documentation such research publications, thesauruses, textbooks, documents issued by RF Ministry of Finance. The publications of those engaged in accounting are also in the focal point of this submission. The analysis made is intended to help to remedy the disadvantages of existing cost evaluation methodology. The author provides comparative analysis of interpretation of this notion, adjust its contents and justify the necessity of counting such cost components as goodwill in cost evaluation of an enterprise. The methodology of the profitable approach to estimating the cost of production based on discounted cash flows in an unlimited billing period is analyzed, as well as the presented direct method for calculating the CEE by the amount of complex non-current and current capital used for the reporting period. The article introduces the methodology of CEE calculations based on the total value of capital (current assets and fixed assets). The formula of CEE calculations with goodwill counted is viewed as seller’s extra earnings transformed in a particular part of future balance costs of a buyer company, which is increasing its capital costs and reducing its production efficiency to some average industry standard. The article is aimed at managers, entrepreneurs, investors, professional appraisers, employees of investment companies and banks, teachers, students and postgraduate students.