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Estonia: Evaluating receivables from debtors under reorganization - Last year, the main new big question was how to evaluate the receivables from debtors for whom reorganization procedures have begun, but by now the successful reorganization practice has shown that receivables from debtors under reorganization should be evaluated similarly to receivables from bankrupt companies, says Mart Nõmper, Member of the Management Board and Sworn Auditor at Rödl & Partner Audit OÜ.

- Increasing liquidity problems and too optimistic expectations for collecting receivables are among the negative trends. Yes, at first sight the current ratio seems to be good if receivables are not written down, but scrutinizing the numbers makes the sight uglier - despite the up to 30 days payment deadline, the actual average collection period is much longer and suppliers are paid much later than agreed, which in conclusion shows the value of overpriced assets and liquidity problems.

- Another clearly negative trend in terms of balance sheet structure, is the strict financing policy of banks, as a result of which companies find themselves in a situation where long-term assets are financed by short-term financial investments. A situation has been created, which by all means should be avoided.

- Complicated economic situation creates significantly more disputes between parties, which is why it is important to pay more attention to the notes of the financial statements and information disclosed in them, especially their all-inclusiveness.

- Complicated times present new challenges also to the readers of the financial statements, concludes Mart Nõmper. When making decisions, one cannot limit to just reading the balance sheet and income statement, often the truth could hide in the cash flow statement, notes or the sworn auditor's report. Also the ratios should be viewed in detail - whether they reveal the necessary information or just half-truth.

Mart Nõmper
Member of the Management Board, Sworn Auditor
Rödl & Partner Audit OÜ
Tel: (+372) 680 7646