Estimating Real Value of Financial Investments

• Main Author: N. M. Ponomarenko
• Format: Article
• Language: English
• Published: State Statistics Service of Ukraine, the National Academy of Statistics, Accounting and Audit (NASAA), the National Academy for Public Administration (NAPA) under the President of Ukraine 2015-06-01
• Series: Статистика України
• Subjects: investment; financial investment; real value of financial investment; decision-making; investment process; expert estimation; management o f financial investments acquisition process
• Online Access: https://su-journal.com.ua/index.php/journal/article/view/20
• ISSN: 2519-1853; 2519-1861

Interpretations of the economic substance of investment and investment objects are the key for effective investment management and high performance of investment activities. That is why of great significance are the issues of correspondence between the category of investment and other related categories and quality of investment accounting methods. The purpose of the article is to review and sum up approaches to definition of the “investment” category, and elaborate guidelines for improvement of methods for the estimating the real value of financial investments. Decision-making on financial investment methods at enterprise level should take account of the following aspects. Firstly, the exchange of in-house emission securities for financial investments forms the capital base of an enterprise, and the prime cost of a financial investment is defined by the fair value of the transferred securities, which is made equivalent to fair market value of these or similar securities on the stock market, or is formed by expert estimation given the absence of fair market value. Secondly, acquisition of investments in exchange for issued shares is feasible in the two cases only: when the fair value of the latter is higher or lower than the notional value. However, the possibility of inefficient economic management of joint-stock companies is not stipulated in the current Ukrainian legislation at all, so only one option of the two is possible, the one that leads to the emergence of share premium. Thirdly, when a financial investment is acquired as a result of an exchange transaction, its fair value is not taken into account: an investment is estimated according to the fair value of the transferred assets. The procedure of financial investments estimation depending on investment method is proposed as a tool for effective management of financial investments acquisition, which can be considered as a significant element in decisions-making.