How should I account for and value my business assets to determine my income from self-employment?

Economic assets (business assets), which serve the company (e.g., inventories) must be accounted for at initial recognition either at the acquisition cost or the production cost. For subsequent measurement, the lower-of-cost-or-market principle must be considered.

Evaluation principles and regulations for business assets

Accounting and valuation of business assets can have a significant impact on company profits. This has direct effects on income tax, as the income of self-employed individuals consists of the company profit (= net income) (see blog post on self-employed activities). Economic assets that have enduring value and serve the company beyond the balance sheet date, must be capitalized from a tax perspective. This means they must be listed in the company's accounting as assets (e.g., typical assets are inventories such as trading goods, raw materials and supplies, as well as unfinished products and services). Various principles must be considered during accounting and valuation:

• Initial valuation at production or acquisition costs
• Production costs: Goods produced in-house are generally accounted for at production costs. These consist of direct costs (e.g., material costs), fixed production overheads and variable production overheads. Administrative and selling overheads are not included.
• Acquisition costs: Goods acquired in exchange are accounted for at the acquisition costs. These include the purchase price, additional acquisition costs (e.g., duties, transport costs), and other costs less reductions in purchase price (e.g., discounts, rebates).
• Private contributions by the owner can be accounted for at the market value.
• Goods acquired free of charge can only be capitalized at most at their market value.
• Subsequent valuation of business assets
• Principle of individual evaluation: Every asset within the inventory must generally be evaluated individually
• Lower-of-cost-or-market principle: The business assets must be valued at each balance sheet date either at the lower value between historical acquisition or production costs.

Self-employed individuals are subject to the general bookkeeping requirements (Art. 957 ff. OR), therefore business assets can always be accounted for at the business or market value (Art. 960 Para. 2 OR). Thus, revaluations to the business value can also be made unrestrictedly (MÄUSLI-ALLENSPACH/OERTLI, Swiss Tax Law, p. 99). Of interest is the possibility of offsetting business losses through a book value adjustment for tax purposes (Art. 31 Para. 1 DBG).

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