Економічний вісник університету (Mar 2022)
Methodological principles of loss of profit assessment
Abstract
Relevance of the research. Russian military aggression against Ukraine has caused significant material losses to the Ukrainian economy: the infrastructure destruction, as well as destruction and damage of businesses property of all forms of ownership. Losses are particularly significant for small and medium-sized businesses, which have a high degree of risk and revenue instability due to significant dependence on external factors. Small and medium-sized businesses are naturally focused on the available resources, which, in the first place, may be lost or damaged. Small business development performing some specific socio-economic functions acts as a driving force of many economies around the world. That is it will be extremely important for the reconstruction of Ukraine's economy in the postwar period. Problem statement. To restore Ukraine, there is a need to assess losses of economic entities, which include the value of damaged property and loss of profit. Therefore, today there is a need to quickly develop an algorithm/methodology to assess loss of profit from hostilities. Analysis of recent studies and publications. The nature of losses and benefits in a number of regulatory sources, namely the Civil Code of Ukraine, the Commercial Code of Ukraine, the National Regulation (Standard) of Accounting and "General Requirements for Financial Reporting" has been analyzed. Unsolved parts of the general problem. Amid Russia's armed aggression in Ukraine, the property of legal entities and individuals is being damaged and destroyed. Recently the Cabinet of Ministers of Ukraine has adopted Resolution № 326 dated March 20, 2022. It concerns the compensation of the value of destroyed (damaged) property as a result of the war to legal entities. Regarding the assessment (examination) of loss of profit, there is no appropriate methodology of loss of profit calculation and determining its size in Ukraine. Moreover, the legislator does not link the plaintiff's right to compensate for damages with the methodology (method) of their assessment. Task and objective. The above circumstances determine the feasibility of developing methodology for calculating loss of profit and its size to create the mechanism for its compensation, taking into account sectoral characteristics of small and medium-sized businesses. Study methodology. General scientific (analysis and synthesis, induction and deduction, and grouping analysis) and special (abstraction, modelling, etc.) methods of studying economic phenomena and processes have been used in the research. The main material (study results). The methodology for estimating the loss of profit of business entities as a result of hostilities (aggression) has been developed. The following criteria should be used to determine the loss of profit: typical circumstances, reasonable costs, and compensation. There is a term to determine the loss of profit. That is to confirm its reality and materiality, and a reasonable amount of estimated revenue or profit. The methodology involves determining eight key indicators (groups of indicators) of an entity based on the analysis of its financial, accounting and tax reporting. It is also an opportunity to take into account when determining the loss of profit the nature and type of business activity. If it is a stable company during a long period, the basis for determining the amount of compensation may be based on its financial statements for 3-5 years. If there is no information about long-term activities, it is advisable to use scenario analysis. Expert assessment can also be performed by building a mathematical model on the principles of information sufficiency, using accounting and financial documents. The loss of profit assessment can be done using direct, evaluation or hybrid approaches, depending on the business specifics. When determining the loss of profit, it is advisable to take into account the peculiarities of doing business in different fields of national economy. The loss of qualified personnel and additional training costs play an important role in the industrial sector; the service sector may incur losses in the form of loss of profit without damage or loss of property; the agricultural sector is the most vulnerable sector in terms of loss of profit due to the war, as well as the most difficult object to calculate the amount of loss of profit having too many factors, which must be taken into account. In our opinion, the loss of profit as a result of armed aggression can take place without direct material damage and as a result of reduction or termination of business performance during the war, which contradicts the Resolution № 326, and requires further regulation. Conclusions. The methodology for assessing the loss of profit of a business entity as a result of hostilities (aggression) has been developed. The methodology involves determining eight key indicators (groups of indicators) of an entity based on the analysis of its financial, accounting and tax reporting. It has been proved that it is advisable to take into account the peculiarities of doing business in different sectors of national economy. The loss of qualified personnel and additional training costs play an important role in the industrial sector; the service sector may have losses in the form of loss of profit without damage or loss of property; the agricultural sector is the most vulnerable sector in terms of loss of profit due to the war, as well as the most difficult object to calculate the amount of loss of profit having too many factors, which must be taken into account. It has been proved that the loss of profit as a result of armed aggression can take place without direct material damage and as a result of reduction or termination of business performance during war.
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