What is fair value surplus in SAP FIN-SEM-BCS - Business Consolidation?

SAP Term: fair value surplus

• Component: FIN-SEM-BCS

• Component Name: Business Consolidation

• Description: For balance sheet items of an investee unit this is the positive difference between the fair market value and the book value of the item as of the date of consolidation. This is true when the book value is lower when the item is an asset item or higher when the item is a liability item. This is also called a fair value difference, but these can also include fair value deficits. Other general terms are excess of fair value over book value, excess of cost over book value when the equity method is applied, and hidden reserve used in Europe. When the difference is negative, this is called a fair value deficit or hidden contingency. Fair value surpluses can result from undervaluations of assets, assets or liabilities that are not yet capitalized but could be, refraining from writeups that would be possible, and overvaluations of liabilities. You have the option to eliminate fair value differences during the course of consolidation.

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• Key Concepts: 
  Fair value surplus is a term used in SAP Business Consolidation (FIN-SEM-BCS) to refer to the difference between the fair value of an asset and its book value. It is calculated by subtracting the book value of an asset from its fair value. The fair value of an asset is the estimated amount for which it could be exchanged between knowledgeable, willing parties in an arm’s length transaction. 
  
  How to use it: 
  In SAP Business Consolidation, fair value surplus is used to determine the amount of gain or loss that should be recognized when an asset is sold or disposed of. It is also used to determine the amount of gain or loss that should be recognized when an asset is revalued. 
  
  Tips & Tricks: 
  When calculating fair value surplus, it is important to remember that the fair value of an asset may not always be equal to its book value. Therefore, it is important to use market data and other relevant information to accurately calculate the fair value of an asset before calculating the fair value surplus. 
  
  Related Information: 
  For more information on fair value surplus and how it is used in SAP Business Consolidation, please refer to SAP Help documentation or contact your local SAP representative.