Hidden reserves
Hidden reserves are parts of equity not shown on the balance sheet; they arise when assets are carried below their value or liabilities above theirs.
Definition
Swiss commercial law expressly permits them to a certain extent — discretionary reserves — and the flat allowances accepted for tax, such as the inventory third or the bad debt provision, are built-in hidden reserves. They make the accounts more prudent and less informative.
On a sale of the business they become visible and are paid for. In a credit assessment, by contrast, what counts is what stands in the balance sheet — a reason to know the extent of the hidden reserves and be able to name it in the conversation.
Where to read it
What the software must be able to do
What helps is separating the commercial-law view from the tax view: whoever can keep both valuations in parallel sees the extent of the reserves. Most SME programs cannot.
Checked Aug 2026
More terms under Bookkeeping and retention: Accrual principle Accrued liabilities Annual accounts Association accounting Balance sheet Balance sheet total Book value Break-even point Business assets Business expenses Cash book Cash flow statement Cash receipts Contribution margin Cost centre Current assets Debit and credit Depreciation Double-entry bookkeeping Duty to keep accounts EBIT EBITDA Equity Equity ratio Financial year Fixed assets Fixed costs Foreign currency General ledger Gross profit Income statement Inventory count Journal Journal entry Liabilities Liquidity Loss carry-forward Membership dues Net profit Opening balance sheet Overheads Pass-through item Prepaid expenses Provision Record-keeping ordinance Reserves Retained profit Simple accounts Swiss SME chart of accounts Tamper resistance Turnover Value adjustment Variable costs Volunteer-run structure Voucher Year-end closing modules