Meaning of Reserves 4

Meaning of Reserves 4

Voluntary retained earnings

You always have the option of building up a voluntary revenue reserve. Sometimes this is even cheaper than the statutory one, because you are much more flexible with the voluntary reserve and simply set up a smaller reserve in the event of fluctuations in profits. That would not be possible with a statutory provision.

Maintenance reserve

This reserve is mainly known to property owners and landlords. Because this reserve is necessary to carry out repairs and modernizations. This reserve is stipulated in accordance with the Condominium Act (Section 21 (5) (4) WEG). However, the law only speaks of an “appropriate maintenance provision”. And this appropriateness cannot be assessed across the board. It all depends on the building (for example, if it is a listed building). However, no minor repairs may be paid for from these reserves.

The provision is based on Peters’s formula, according to which the production costs (Section 255 (2) HGB) are multiplied by a factor of 1.5 and then divided by 80 (which stands for 80 years). This results in the maintenance costs per square meter. According to § 6 EStG, the maintenance reserve is to be capitalized in the balance sheet. This means that you count the repairs and modernizations for your building as part of the manufacturing costs. All of these costs that you have within 3 years of purchasing the building count towards the manufacturing costs. However, only if the expenses minus VAT exceed 15% of the acquisition costs.

Hidden reserves

There is no mandatory booking account for the hidden reserves. They are neither prescribed nor shown in the balance sheet. This is part of the equity that is put aside (earmarked reserves) and is only taxed when it is liquidated. These hidden reserves arise, for example, when you underestimate your assets or overestimate your debts. This makes your equity appear less than it is on the balance sheet, but without showing an item called “reserves”.

Dissolve reserves correctly

Since you have set aside your reserves for a specific purpose, you will not be able to release them until that purpose is fulfilled. For example, when you buy a machine or start a maintenance measure. This is precisely regulated by law.

Dissolution of reserves in the UG (GmbH)

In accordance with the GmbH Act, which we have already mentioned above with regard to the retention, you may only use the reserve either to increase the share capital ( § 57c GmbHG ), to compensate for an annual deficit or to compensate for a loss carried forward.

Dissolution of reserves in the AG

The dissolution in the stock corporation is even more complicated, that means more extensively regulated and also stricter. It is based on Section 150 (3) and (4) AktG. You may only use the retained earnings to compensate for an annual deficit or a loss carryforward if you cannot cover these items with a profit carryforward or the annual surplus of the previous year. And this rule only applies if your statutory reserve including capital reserve is less than 10% of your share capital! If the reserves are higher, you can use them under less strict regulations to compensate for annual
deficits and loss carryforwards or to increase capital (Sections 207-220 AktG).

Postings to release reserves

A wide variety of posting records can occur in connection with reserves and their release. That depends on whether the provisions fit or were too high or too low and what they were intended for. For example, when settling tax provisions , which you then offset against the bank account. In addition, the “Other expenses unrelated to the accounting period” comes into play.

The following variants can therefore be considered:

  • Your provision is higher than the liability: then you can book the rest as income, which increases your profit.
  • If your provision was too low, you will have to pay the remaining amount. So you have to book this amount as an expense, which reduces your profit.
  • If you have set aside the specific amount and thus pay a liability in the exact amount of the provision, then you can dissolve it completely, which has no effect on income.
  • However, if in the end no investment is made or the money is simply not used, then you book the provision as operating income and thereby increase your profit.


Properly managing reserves can be challenging for newbies. It is therefore all the more important to seek professional support. You can work with good software here and also take a tax advisor on board. Both effectively support you in booking correctly from the start.

Reserves 4