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How to complete a Statement of AFfairs (SOA)

Step 3 - Determine what values to use

For each class of asset the book value will be required and the amount considered to be recoverable.

At this stage it is important that all assumptions are documented so that should any questions be asked at a later stage the full decision making process can be explained.  Any discrepancies in the Statement of Affairs may be queried at a much later stage and whilst at the preparation stage such a document would be for the preparer’s eyes only may prove to be an invaluable document to address any queries at a later stage.

Book value

The book value is the amount that would appear in the business’ accounts.  It may include provisions for bad debts already identified and other factors that would be included in the normal course of business.  To establish this amount it may be necessary to roll the last set of accounts (management or statutory) forward to the date at which the statement is to be prepared – e.g. accounting for depreciation.  This value will normally be established by reference to the Trial balance and supporting reports (e.g. aged debtor listing).

Realisable value

The realisable value is usually the most difficult aspect to calculate since it relies upon judgement. 

picture of calculatorWhere possible 3rd party valuations should form the basis of the expected realisations but care should be taken to consider the basis and reasons for the valuation.  For example the valuation report from an agent to market a leasehold property pre insolvency is likely to give a valuation based upon a lengthy marketing campaign and on the assumption that rent has been paid up to date.  For the purpose of the Statement of Affairs consideration should be given to the likely constraints that could affect the valuation such as termination on insolvency clauses etc.

As much detail should be considered when determining the value – i.e. if possible go through a list of specific assets considering line by line whether a provision is required.  Where it is (or isn’t) any relevant details should be documented so that the rationale can later be referred to if necessary.

It may be worth considering seeking specialist advice over the valuation of all or certain assets. 


Statement of Affairs

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