Accounting for fixed assets. how to switch to component accounting according to IFRS. Major repairs as a separate inventory object Why is component accounting needed?

What are fixed assets? How to properly account for fixed assets in accounting? What is depreciation and how is it calculated?

Fixed assets in accounting

Fixed assets of an enterprise are property that is used as a means of labor for the production of goods, provision of services, execution of work, or for the management of an institution over a period that is more than 12 months, or an operating cycle that exceeds 12 months.

What applies to fixed assets:

• buildings
• work equipment
• power machines
• measuring instruments and control devices
• computer technology
• means of transport
• tools
• household supplies and equipment
• production and productive, breeding and working livestock
• perennial plantings
• on-farm roads and other relevant facilities

Also, fixed assets include:

• investments for the purpose of radical land improvement (irrigation, drainage and other land reclamation work)
• investments in fixed assets on a lease basis
• plots of land, natural resources (subsoil, water and other resources)

Fixed assets, which are intended only to be provided by an institution for monetary compensation for temporary use and possession or for temporary use in order to make a profit, are reflected in accounting, as well as financial statements, as part of profitable investments in material assets.

An asset is accepted by an institution for accounting as a fixed asset if the following conditions are simultaneously met:

• the purpose of the object is to use it in the production of goods, for the provision of services or in the performance of work; for the administrative needs of the institution or for provision by the institution for monetary compensation for temporary use or temporary use and possession
• the purpose of the object is to use it for a long time, that is, a period longer than 12 months or an operating cycle longer than 12 months
• the institution does not plan further resale of this object
• it can bring economic benefit (profit) to the institution in the future

Depreciation of fixed assets

During operation, the fixed asset transfers its value to the cost of production using depreciation. Depreciation charges are calculated monthly over the entire useful life of the asset.

Useful life is the period during which the use of an object, which is a fixed asset, brings economic benefit (profit) to the institution. For a number of fixed assets, such a period is determined by the quantity of products (volume of work in physical terms) that is expected to be obtained as a result of using this object.

Documents on fixed assets:

In accounting, proper documentation of the movement of fixed assets is very important.

Funds are accepted for accounting only on the basis of relevant primary documentation:

• acceptance and transfer act: form OS-1, used for accounting for all fixed assets, with the exception of structures and buildings, form OS-1a - for accounting for structures and buildings, form OS-1b - when accounting for groups of fixed assets, with the exception of structures and buildings
• equipment acceptance certificate in form OS-14
• act on acceptance and transfer of equipment for installation in form OS-15

An inventory card should be opened for each fixed asset item:

• Form OS-6 - for one fixed asset item
• Form OS-6a - for a group of fixed assets
• Form OS-6b - inventory book for accounting of fixed assets

In case of write-off of fixed assets, it is necessary to prepare a write-off act:

• according to the OS-4 form - for one object
• according to the OS-4a form - for road transport
• according to the OS-4b form - for a group of objects

Accounting for fixed assets in an enterprise

Fixed assets in accounting are accounted for in account 01 “Fixed Assets”. The entire volume of fixed assets is transferred to account 01 through account 08 “Investments in non-current assets”. Account 08 is intermediate between accounts 01 “Fixed assets” and 60 “Settlements with suppliers.” When an object is accepted for accounting, all costs are collected in the debit of account 08, after which they go from the credit of account 08 to the debit of account 01, from this moment the object is considered to be put into operation. The disposal and write-off of the object occurs from credit account 01.

To calculate depreciation charges, account 02 “Depreciation” is used.

Write-off of fixed assets up to 40,000 rubles.

PBU 6/01 clause 4 allows organizations to accept inexpensive objects (the cost of which is within 40 thousand rubles) for accounting not as fixed assets, but as inventories, and then write them off as expenses.

For example, an enterprise purchased a printer for 5,000 rubles; there is no point in accepting it on account 01 as OS or charging monthly depreciation on it. It is much more convenient to accept it as an inventory item and immediately write it off as an expense. In this case, the accounting department needs to reflect the following entries: D10 K60 - the object is accepted for accounting as materials, and then write it off as expenses using the entry D20 (25, 26, 44) K10.

This can only be done if the cost of the fixed asset is less than 40,000 rubles; if its fixed asset is worth more than 40,000 rubles, then the object must be accepted on account 01.

Receipt of fixed assets to the enterprise

Fixed assets are assets that are directly used to produce products, provide services and perform other functions of the enterprise and have a service life of at least one year. In addition to those in operation, part of the fixed assets may be kept in stock or leased. Depreciation of fixed assets subject to wear and tear, for example, machine tools or vehicles, is taken into account in the cost of manufactured products (services provided).

Let us dwell in more detail on the features of accounting for the receipt of objects at an enterprise, consider the entries for fixed assets made when accepting them for accounting in the case of construction, purchase, gratuitous receipt, as well as when receiving an object in the form of a contribution to the authorized capital.

Accounting for receipt of fixed assets

Fixed assets put into operation are accounted for using the “Fixed Assets” account (account 01). The basis for commissioning is an order from the head of the enterprise. The accounting department draws up transfer and acceptance reports and records fixed assets on inventory cards (type OS-6).

Most often, the receipt of fixed assets occurs as a result of:

1. completion of construction
2. acquisitions for a fee (OS purchase)
3. receiving free of charge
4. receipts in the form of contributions to the authorized capital

In accordance with this, the accounting for the receipt of such funds is somewhat different. Let's consider each case separately.

Accounting for construction projects accepted for operation

The formation of the initial cost of a commissioned facility in this case is determined by the cost of its construction. These costs are reflected in the balance sheet account “Investments in non-current assets” (08 account). The construction of facilities can be carried out by the enterprise or with the involvement of contractors.

In the case of construction with the help of a third-party developer, the account “Settlements with suppliers and contractors” (account 60) is used.

Accounting entries during the construction of an OS facility by third parties:

D08 – K60 – the full cost of the work has been determined

D19 – K60 – VAT allocated

D01 – K08 – construction site accepted for operation

D68 – K19 – allocated VAT is sent for reimbursement from the budget

D60 – K51 – funds transferred to the contractor.

If construction is carried out on its own, then to record the costs of it, the accounts “Materials” (10), “Settlements with personnel for wages” (70), “Auxiliary production” (23), “Depreciation” (02) and others are used. In this case, the postings are made:

D08 – K10 (02,23,70,69, etc.) – construction costs are taken into account

D01 – K08 – the facility has been put into operation.

Accounting for the acquisition of fixed assets

The purchase of fixed assets is the most common type of their receipt. To account for such funds, the accounts “Settlements with suppliers and contractors” (account 60) or “Settlements with various debtors and creditors” (account 76) are used. Depending on the type of funds purchased, corresponding subaccounts are opened to the “Investments in non-current assets” (08) account.

The initial cost of acquired fixed assets is the sum of all expenses associated with their purchase and commissioning. Such expenses, in addition to the amount paid to the seller, may include: customs duties, non-refundable taxes, state duties, fees for intermediaries and consultants, as well as funds spent on installation and commissioning of equipment.

Purchase of fixed wiring equipment:

D08 – K60 (76) – the cost of the object is taken into account according to the supplier’s documents

D19 – K60 (76) – VAT is allocated from the cost of the object

D08 – K70 (69, 76, 10, etc.) – costs for delivery, assembly, adjustment are taken into account

D01 – K08 – object accepted for operation

D68 – K19 – VAT is sent for reimbursement from the budget

D60 (76) – K51 – funds transferred to the supplier.

Accounting for fixed assets received free of charge

The initial cost of fixed assets of an enterprise that were accepted free of charge, for example, in the form of a gift, is considered to be the market value of such objects. If it is impossible to determine it, the assessment is based on the cost of similar material assets. According to the Tax Code of the Russian Federation, funds received free of charge are considered non-operating income of the enterprise.

Free receipt of basic wiring equipment:

For accounting purposes, the subaccount “Gratuitous receipts” (98-2) is used. The following entries are reflected in the accounting records:

D08 – K98-2 – fixed assets accepted for accounting

D01 – K08 – objects put into operation.

D98-2 – K91 – depreciation charges are written off.

Receipt of fixed assets as a contribution to the authorized capital

Fixed assets received as a contribution to the authorized capital are accounted for at the cost agreed upon by the founders of the organization (joint stock company). If necessary, resort to the services of an independent appraiser.

The contribution of the founders is reflected using the account “Authorized capital” (80), the subaccount “Calculations for contributions to the authorized capital” (75-1).

The wiring is as follows:

D75-1 – K80 – debt of the founders has been formed

D08 – K75-1 – funds received as a contribution to the authorized capital of the organization

D01 – K08 – the facility has been accepted for operation.

As a result of the article, we will summarize all the transactions performed when one or another type of receipt of an object at the enterprise into one table.

Postings upon receipt of fixed assets:

The concept of depreciation of fixed assets

Depreciation of fixed assets - what is it? Why is depreciation needed? What is useful life? We will discuss the features of depreciation calculation and the corresponding accounting entries in the article below.

During the operation of fixed assets, gradual obsolescence of the object occurs, both moral and physical. Parts wear out, power is lost, and productivity decreases. As a result, complete physical wear and tear occurs, as a result of which the object is deregistered and a new modern model is purchased in its place.

There is such a thing as useful life - the period during which an object is able to operate at full capacity and bring economic benefits. During this entire period, depreciation is calculated from the cost of the fixed assets, which, in essence, represents a unit of depreciation in monetary terms.

Why is depreciation needed?

Depreciation is a very important process, thanks to which the funds spent on the acquisition of fixed assets are returned as part of the proceeds from the sale of manufactured products.

From the 1st day of the month following the month the facility was put into operation, the process of calculating depreciation begins. Every month, depreciation charges are calculated and written off to the cost of products, works, services or to sales expenses (for trading enterprises). Thus, when a product (good) goes on sale, its cost includes part of the cost of fixed assets used in the production process in the amount of depreciation. These funds are returned to the enterprise after the sale of products (works, services) and receipt of payment from the buyer. The funds received can be used to improve existing fixed assets (repair, reconstruction, modernization) or to purchase new, more modern facilities.

The process of calculating depreciation is continuous, continuing from month to month until the object is completely depreciated, that is, until the cost of the fixed assets is completely transferred to the cost of production. After this, the object can be written off from the account in which it is recorded (account 01 “Fixed Assets”). Also, depreciation accrual stops when an object is disposed of from the enterprise, for example, upon its sale, gratuitous transfer, or obsolescence.

According to the law, depreciation begins on the 1st day of the month following the month of commissioning and stops on the 1st day of the month following the month of deregistration.

Depreciation also ceases to be accrued if the object is transferred to conservation for a period of more than three months, or to reconstruction (modernization) for a period of more than twelve months.

Depreciation of fixed assets depends on the useful life established for the object. This period is set by the enterprise independently depending on the type of object. In this case, you need to be guided by the Classification of fixed assets, according to which all objects are divided into depreciation groups. There are 10 such groups in total, each with its own useful life.

Upon receipt of a fixed asset, the organization, in accordance with the classification, determines which group the received fixed asset belongs to, selects the useful life corresponding to this group and, based on it, subsequently accrues depreciation on a monthly basis.

Useful life depending on depreciation group:

• 1 – 1-2 years
• 2 – 2-3 years
• 3 – 3-5 years
• 4 – 5-7 years
• 5 – 7-10 years
• 6 – 10-15 years
• 7 – 15-20 years
• 8 – 20-25 years
• 9 – 25-30 years
• 10 – from 30 years

Upon receipt of the object, a transfer acceptance certificate document is drawn up in the form OS-1, OS-1a or OS-1b. Information about the selected useful life must be reflected in this document.

Postings for depreciation

Depreciation is a business transaction for which an entry must be reflected in the accounting records of the enterprise.

The posting of depreciation is carried out on the basis of a document - a payroll sheet for depreciation.

Accounting account 02, called “Depreciation,” is intended to account for depreciation. In the credit of account 02, calculated depreciation deductions are entered monthly in correspondence with the accounts for accounting expenses for sales or production.

Posting for depreciation:

D20 (23, 25) K02 – depreciation of an asset used in production has been accrued;

D26 K02 – depreciation of fixed assets used for business needs has been accrued;

D44 K02 – reflects accrued depreciation on fixed assets used in trading activities.

Thus, depreciation accumulates on loan account 02.

When writing off a fixed asset from accounting, all depreciation accumulated on account 02 is written off by posting D02 K01.

When selling fixed assets, accumulated depreciation is written off using posting D02 K91/2.

Knowing the initial cost of the fixed asset at which it is listed in debit account 01, and the depreciation accrued for the entire period of operation on loan account 02, you can calculate at any time the residual value of the object by subtracting the value of loan 02 from the value in debit 01. Knowing the residual value value is useful in a number of cases, for example, when disposing of an object, selling it, calculating depreciation charges.

There are 4 methods for calculating monthly depreciation charges:

• linear
• reducing balance method
• method of writing off the cost of fixed assets proportional to manufactured products

Calculation of fixed assets depreciation using the linear method

To calculate depreciation charges in accounting, 4 methods are used.

Methods for calculating depreciation of fixed assets:

• Linear method
• Reducing balance method
• Method proportional to the volume of output
• Method based on the sum of numbers of years of useful life

In all of these 4 methods of calculating depreciation, the concept of depreciation rate is used - an annual percentage of the cost of fixed assets.

The basis of the calculation is the initial (or replacement) cost of the object or the residual value, the latter is obtained by subtracting depreciation from the original cost. Replacement value is the value obtained as a result of the revaluation of fixed assets; it can be either more (in the case of revaluation) or less (in the case of a depreciation) of the original one.

The organization independently determines for itself which calculation method will be used for a given object; its choice should be fixed in its accounting policy. In addition, the selected method is reflected in the inventory card of the fixed asset.

Let us first consider in more detail the linear method of calculating depreciation charges. As a rule, in the vast majority of cases, enterprises use this method.

Straight-line depreciation method

This is the simplest and most common calculation method. Over the entire period of use, depreciation is written off in equal shares. Depreciation should begin to be calculated on the first day of the month following the month the object was accepted for accounting.

To calculate depreciation charges using this method, you need to know the original (or replacement) cost of the fixed asset and the depreciation rate.

Formula for calculating depreciation using the straight-line method:

A = Initial cost * Depreciation rate.

The initial cost is the cost at which the object is recorded on account 01.

Formula for calculating the depreciation rate:

Norm A = 100% / useful life.

The resulting depreciation amount is annual; to calculate monthly deductions, you need to divide the annual depreciation by 12 months.

Example of calculation using the linear method:

The car has an initial cost of 200,000 and was registered on March 10, 2014. The useful life is assumed to be 10 years. How to calculate car depreciation?

Annual A. = 200,000 * (100%/10) = 20,000.

Monthly A. = 20,000/12 = 1666.67.

Thus, every month, starting from April 1, 2014, depreciation should be charged in the amount of 1666.67; on this amount, a monthly depreciation posting should be made - D20 (44) K02.

Calculating depreciation using the linear method has a number of advantages over non-linear methods.

The method is very simple; monthly depreciation charges are calculated once at the beginning of operation.

The cost of the object is evenly transferred to the cost of products (services, works) throughout the entire period of use. With nonlinear methods, in the first years, most of the cost of the operating system is written off, due to which the cost of production increases in these years. For enterprises that plan to quickly update fixed assets, it is more convenient to use non-linear methods; if an asset is purchased for long-term operation and its rapid replacement is not planned, then it is better and easier to use the linear method of calculating depreciation.

Calculation of depreciation using the reducing balance method

All methods of calculating depreciation of fixed assets are divided into linear and non-linear. Let's take a closer look at the nonlinear calculation method - the reducing balance method. Using this method, accelerated depreciation of fixed assets is carried out. Why is this method of calculation convenient? In what cases is it more profitable to use it? Below is an example of calculating depreciation charges using the accelerated method.

Unlike the linear calculation method, to calculate depreciation using the reducing balance method, the residual value of the object is taken. The residual value is calculated by subtracting the accrued depreciation from the original (or replacement) cost of the object. That is, the residual value is equal to the difference between the debit of account 01 and the credit of account 02.

In addition, this method uses an acceleration factor that the organization sets independently. This coefficient is intended to accelerate the write-off of the cost of an object through depreciation and, accordingly, the return of funds invested in the acquisition of fixed assets.

Upon receipt of fixed assets, the object is accepted for accounting on account 01, from the next month depreciation should be charged on it and monthly entries should be made to write off depreciation charges (D20 (44) K02).

General formula for calculating the reducing balance method:

A = Residual value * Depreciation rate * Acceleration coefficient.

An example of calculating depreciation of fixed assets using the accelerated method:

We have fixed assets with an initial cost of 200,000 and a useful life of 5 years. Let us take the acceleration coefficient equal to 2.

When calculating depreciation using the reducing balance method, the depreciation rate will be calculated taking into account the acceleration factor.

Norm A = 100%*2 / 5 = 40%

1 year of operation:

Residual value (Remaining) = 200,000 – 0 = 200,000.

Monthly A = 80,000 / 12 = 6666.67

2nd year of operation:

Ost. = 200,000 – 80,000 = 120,000.

Year. A. = 120,000 * 40% = 48,000.

We eat. A. = 48,000 / 12 = 4000

Ost. = 200,000 – 80,000 – 48,000 = 72,000.

Year. A. = 72,000 * 40% = 28,800.

Ost. = 200,000 – 80,000 – 48,000 – 28,800 = 43,200.

Year. A. = 43,200 * 40% = 17,280

As you can see, with each year of operation, monthly depreciation charges decrease. Most of the cost of a fixed asset is written off in the early years. In order to completely write off the cost of an object, you need to use Article 259 of the Tax Code of the Russian Federation, according to which, at the moment when the residual value is less than 20% of the original cost, depreciation is calculated as the residual value divided by the number of remaining months of the useful life.

In our example, 20% of the original cost is 40,000.

Ost. = 200,000 – 80,000 – 48,000 – 28,800 – 17,280 = 25,920, this is less than 20% of the original cost.

Therefore, in the future we will calculate monthly depreciation by dividing the residual value by 12.

We eat. A. = 25920 / 12 = 2160.

As a result of these calculations, the value of the fixed asset object will be completely written off, the residual value will be equal to 0, the object can be written off from account 01.

When is it beneficial to use the reducing balance method?

The accelerated method of calculating depreciation charges is convenient to use if an organization, for some reason, needs to write off an asset as quickly as possible. This is true for operating systems that quickly wear out or become obsolete, and whose performance decreases significantly as the period of use increases.

An example of such a fixed asset is a computer. Every year more and more powerful models appear, and very quickly a computer whose service life has not yet come to the end may no longer cope with the assigned tasks. After 2-3 years of use, it needs to be upgraded or replaced with a more modern model. Therefore, it will be convenient here to write off the bulk of its cost in the first 1-2 years and use the money returned as part of the proceeds to improve the computer or purchase a new one. At the same time, you can still manage to sell the old model before its service life expires. In this case, it turns out that we will return almost the entire cost of the computer using accelerated depreciation, and we will receive additional profit by selling the old model.

That is, if an organization plans to quickly update fixed assets, then it is more profitable for it to use the accelerated declining balance method.

There is also such a non-linear method of calculating depreciation as the method proportional to the volume of production and the sum of the numbers of years of useful life.

Method of writing off the cost of fixed assets based on the sum of the numbers of years of useful life

There are 4 methods for calculating depreciation of fixed assets in accounting. One of them is the linear method - the most common and simple.

The remaining 3 are nonlinear:

• Reducing balance method
• Method of writing off the cost of fixed assets based on the sum of the numbers of years of useful life
• Method of writing off cost proportional to the volume of products (works, services)

Let us analyze the method of calculating depreciation based on the sum of the numbers of years of the useful life.

This method, along with the reducing balance method, is an accelerated way to write off the cost of fixed assets. In the first year of operation, the monthly depreciation amount written off will be the largest; with each subsequent year, the monthly depreciation will decrease.

In some cases, the accelerated depreciation method is more profitable for the enterprise than the straight-line method, in which depreciation is calculated evenly throughout the entire useful life.

The basis of the calculation is the initial cost of the fixed asset at which it is accepted for accounting.

Formula for calculating depreciation charges:

A = Initial cost of fixed assets * Depreciation rate.

The depreciation rate for each year is calculated separately and depends on the useful life established for the object when it was accepted for accounting.

General formula for calculating the norm:

Norm A = number of years remaining until the end of the useful life / sum of the numbers of years of the useful life.

For example, if the useful life is 7 years, then the annual depreciation rate in the first year will be calculated:

Norm A in the 1st year = 7 / (1+2+3+4+5+6+7) * 100% = 25%.

N. And in the 2nd year = 6 / (1+2+3+4+5+6+7) * 100% = 21.4%.

N. And in the 3rd year = 5 / (1+2+3+4+5+6+7) *100% = 17.86%

N. And in the 4th year = 4 / (1+2+3+4+5+6+7) *100% = 14.3%

For the remaining years of the useful life, the depreciation rate is calculated according to the same principle, the numerator decreases by one every year, the denominator remains unchanged.

Calculation example

There is a fixed asset, accepted for accounting on January 10, 2014 at an initial cost of 200,000. Its useful life is set at 4 years. How to calculate monthly depreciation charges for this fixed asset?

First of all, we note that the facility was put into operation in January 2014, which means depreciation on it will be accrued from February 1, 2014.

Norm A = 4 / (1+2+3+4) * 100% = 40%.

Annual A = 200,000 * 40% = 80,000.

Monthly A = 80,000 / 12 = 6666.67.

Norm A = 3 / (1+2+3+4) * 100% = 30%.

Annual A = 200,000 * 30% = 60,000.

Monthly A = 60,000 / 12 = 5000.

Norm A = 2 / (1+2+3+4) * 100% = 20%.

Annual A = 200,000 * 20% = 40,000.

Monthly A = 40,000 / 12 = 3333.33.

Norm A = 1 / (1+2+3+4) * 100% = 10%.

Annual A = 200,000 * 10% = 20,000.

Monthly A = 20,000 / 12 = 1666.67.

Thus, over 4 years, the cost of the fixed asset will be completely written off through depreciation.

Advantages and disadvantages of the method

As mentioned above, this method is accelerated. In the first years, the largest part of the cost of the fixed asset is written off; with each subsequent year, depreciation charges are reduced until the cost of the fixed asset is completely written off.

In what cases is it convenient to use the accelerated depreciation method?

If an enterprise expects to quickly update its fixed assets, then it is better to use the accelerated method. In this case, the company will be able to quickly return the funds spent on the acquisition of the object through depreciation charges as part of the proceeds from the sale of goods, products, work, and services.

If the equipment used wears out quickly, its productivity decreases significantly with each year of operation, or quickly becomes obsolete, then it is better to use an accelerated method, for example, the write-off method based on the sum of the numbers of years of useful life. The money spent will be returned to the enterprise faster, and with this money it will be possible to buy new equipment.

In addition to this method, you can also use the reducing balance method, where the company independently applies the acceleration factor and can return the funds invested in the object much faster.

In addition to these advantages, the method of writing off the cost of a fixed asset by the sum of the numbers of years of its useful life also has its disadvantages.

An undoubted disadvantage is the rise in price of manufactured products (works, services) in the first years, since it is in these years that depreciation charges are maximum. Depreciation is included in the cost price, so in the first years the cost of production will be overestimated, gradually decreasing every year.

Write-off of the cost of fixed assets in proportion to the volume of production

The write-off method is proportional to the volume of output - this non-linear method of calculating depreciation can only be applied to fixed assets for which the expected output has been determined. In what cases is it convenient to use this method of calculation, how to calculate depreciation in proportion to the volume of actually produced products - more on this below.

In general, there are 4 methods for calculating depreciation of fixed assets, one of which is linear and 3 non-linear.

The straight-line method is characterized by uniform depreciation over the entire useful life. As a rule, this is the method most often used for calculation.

Three nonlinear methods:

• The declining balance method is an accelerated method of calculating depreciation, characterized by writing off most of the cost of a fixed asset in the first years of operation; with each subsequent year, depreciation charges decrease
• The write-off method based on the sum of numbers of years of useful life is also an accelerated method.
• The method of writing off the cost of a fixed asset in proportion to the volume of output. We will talk about this method of calculating depreciation in more detail below; we will give an example of calculating depreciation charges using this method

Formula for calculating depreciation proportional to the volume of output:

As mentioned above, the method is applicable for those objects for which the manufacturer has previously established the expected production output - that is, if the amount of work that the object must complete during its useful life is known.

For the calculation, we take the initial cost of the fixed asset, which is formed when the object arrives at the enterprise and is put into operation.

General formula for calculation:

A = Actual volume of products produced for the reporting period * Depreciation rate

Depreciation rate = Initial cost / Estimated volume of production over the useful life.

Example of depreciation calculation:

The main means of transport is a truck. Its initial cost is 600,000 rubles. Accepted for registration on April 20, 2014. The estimated mileage over the entire useful life established by the manufacturer is 400,000 km

Calculation:

Norm A = 600,000 / 400,000 = 1.5 rubles/km

Depreciation on a car is calculated monthly, so we will take 1 month for the reporting period. We begin to calculate depreciation from May 1, 2014, that is, the next month after commissioning. Depreciation ceases after the cost of the fixed asset is completely written off or when the fixed asset is disposed of.

The actual mileage of the truck in May was 1000 km.

A = 1000 * 1.5 = 1500 rub.

Actual mileage for June = 4000 km.

A = 4000 * 1.5 = 6000 rub.

Actual mileage for July = 5000 km.

A = 5000 * 1.5 = 7500 rub.

Next, depreciation for the car is calculated in a similar way depending on the actual mileage in that month. Write-offs will continue until the cost is completely written off through depreciation.

If the cost of an object is completely written off, but its useful life has not expired, that is, the fixed asset is in working condition, then the object can be used further, and depreciation does not need to be charged.

When is it convenient to use the method of writing off cost in proportion to the volume of production?

Any method of calculating depreciation has its pros and cons; in one case it is convenient to use one method of calculation, in another - another.

In this case, writing off the cost of an object depending on the volume of products produced is convenient when there is a direct dependence of the wear and tear of the object on the frequency of its operation.

This method is common in industry, such as mining, or for passenger or truck transport.

Whatever method is chosen for calculating depreciation, it must be reflected in the accounting policies of the organization.

Procedure for revaluation of fixed assets

The initial cost at which a fixed asset item is accepted for accounting may change in several cases during operation. If the object was reconstructed or modernized, as well as during a revaluation. The value obtained as a result of the revaluation will be called the replacement value.

What is revaluation of fixed assets?

Revaluation is the process of recalculating the original cost of fixed assets in order to match it with market prices. This procedure is available only to commercial enterprises that independently determine for themselves the frequency of revaluation, as well as the objects for which it will be carried out. When setting the frequency of revaluation of fixed assets, you need to remember one limitation: it can be carried out no more than once a year in the last month of the year. All issues related to the revaluation of fixed assets must be reflected in the accounting policies of the enterprise.

It must be borne in mind that if a certain frequency of cost recalculation is established for an object, and it is indicated in the Order on Accounting Policy, then this frequency must be observed and revaluation must be carried out without fail.

How is the value of fixed assets revalued?

The procedure must be documented; all necessary entries for the revaluation of fixed assets associated with an increase or decrease in their value based on the results of the recalculation must be reflected.

As mentioned above, revaluation is carried out at the end of the year. The procedure begins with issuing an order indicating the objects for which revaluation should be carried out. The results of the revaluation (new price of the object and recalculated depreciation) should be reflected in the inventory card of the fixed asset object.

The method of revaluation of fixed assets for commercial enterprises is called the method of direct recalculation at documented market prices.

The cost of fixed assets is recalculated in accordance with market prices on the date of recalculation. You can determine the average market price either independently or with the involvement of specialist appraisers.

The new (replacement cost) is reflected at the beginning of the new year.

The increase in value (revaluation) in accounting is reflected in the credit of account 83 “Additional capital” in correspondence with the debit of account 01 (entry D01 K83).

The decrease in value (markdown) is reflected in the debit of account 91 “Other income and expenses” in correspondence with the credit of account 01 (entry D91/2 K01).

Along with the cost reflected in the debit of account 01, the depreciation accrued on account 02 is also recalculated.

How to revaluate depreciation of fixed assets?

Depreciation rate = (accrued depreciation / initial asset value) * 100%.

Recalculated depreciation = replacement rate * degree of wear.

The increase in depreciation as a result of revaluation is reflected by posting D83 K02.

The decrease in depreciation as a result of markdown is reflected by posting D02 K91/1.

For clarity, let’s look at two examples: revaluation and depreciation of the cost of fixed assets.

Revaluation of fixed assets (example):

We have fixed assets with an initial cost of 100,000. Depreciation on the object was charged at 25,000. As a result of revaluation, the cost increased to 110,000. What entries need to be reflected in the accounting department?

The cost of the operating system has increased – we are seeing an increase in valuation.

Let's recalculate depreciation:

Wear rate = (25,000 / 100,000) * 100% = 25%

A = (110,000 * 25%) / 100% = 27,500.

That is, as a result of revaluation, the value of the fixed asset increased by 10,000, depreciation increased by 2,500.

Postings for revaluation:

10,000 – D01 K83 – the value of the object during additional valuation has been increased.

2,500 – D83 K02 – accrued depreciation on the facility was increased as a result of revaluation.

Depreciation of fixed assets (example):

We have an object with an initial cost of 100,000. Accrued depreciation is 25,000. During the market analysis, the average market price for this object was identified - 80,000. How should the transactions be reflected?

The cost of a fixed asset has decreased – we are seeing a markdown.

Let's recalculate depreciation:

Wear rate = 25%

A = (80,000 * 25%) / 100% = 20,000

That is, as a result of revaluation, the value of the fixed asset decreased by 20,000, and the amount of accrued depreciation decreased by 5,000.

Postings for markdowns:

20,000 – D91/2 K01 – the value of the object during markdown was reduced.

5,000 – D02 K91/1 – the accrued depreciation on the object during markdown was reduced.

Inventory of fixed assets (surpluses and shortages)

Inventory of fixed assets is a procedure necessary for every enterprise. Inventory is the process of reconciling the actual availability of fixed assets and their location with accounting data. This important procedure allows you to identify inconsistencies between accounting and actual data, and identify surpluses and deficiencies.

The procedure for conducting an inventory is regulated by the Methodological Instructions for Inventorying Property and Financial Liabilities.

Before you start taking inventory, you need to prepare - check the following points:

• Availability and correct completion of documents on fixed assets: inventory cards, inventory books, inventories and other documents
• Availability of technical documentation for fixed assets
• Availability of documents for leased objects, as well as for leased ones

If any documents are not found or damaged, they should be restored, obtained or executed.

Before starting the procedure, a receipt is taken from the financially responsible persons stating that all objects are at their destination and accounted for.

Inventory can be carried out in the following cases:

• Control check
• Change of financially responsible person
• The next scheduled check, etc.

The procedure for conducting an inventory of fixed assets

This procedure must be accompanied by proper documentation.

First of all, the decision to conduct an inventory of fixed assets is enshrined in the inventory order. For this purpose, there is a unified form INV-22. This order states which assets are subject to inspection, sets the date for the procedure, as well as the composition of the inventory commission.

The formation of an inventory commission is an integral part of this process. It should include representatives of the accounting department, financially responsible persons, representatives of management, and third parties who are not employees of the enterprise. The functions of the formed commission include monitoring the inventory process, preparing the necessary documentation and issuing a final conclusion.

When the date specified in the order arrives, a check of the availability and condition of the enterprise’s fixed assets begins.

The commission inspects all objects, enters information about the inspected objects into special inventory records in the INV-1 form:

• Name
• Purpose
• Inventory number
• Technical and operational indicators

When making an inventory of buildings, structures, and land plots, the availability of documents confirming the location of these objects in the ownership of the organization is checked.

Inventory lists are compiled in two copies: for the accounting department and for the financially responsible person.

When making an inventory of leased fixed assets, inventories are compiled in triplicate, the third version of the inventory is transferred to the direct owner of the object.

For fixed assets for which discrepancies are identified during the inventory process, matching statements are compiled in the INV-18 form.

The matching statement is also drawn up in two copies: for accounting employees who will make the necessary entries to account for surpluses and write off shortages, and for the materially responsible person.

Objects that have fallen into disrepair and cannot be restored are reflected in a separate inventory indicating the date of commencement of use, as well as the reason why they are not suitable for use.

Objects under repair are also reflected separately; an inventory report of unfinished repairs in the INV-10 form is filled out for these fixed assets.

Objects that are listed in the organization, but do not belong to it, for example, those that are in custody, are entered into separate matching statements.

All inventory documents are certified by the signatures of financially responsible persons and members of the commission headed by the chairman.

The final results of the inventory of fixed assets are entered into the statement of results, form INV-26.

Accounting for inventory of fixed assets

The results of the inventory are subject to immediate reflection in the accounting records of the enterprise. Identified surpluses and shortages must be reflected using accounting entries in the month in which the inventory was carried out.

All identified surpluses and shortages must be explained by financially responsible persons.

Surplus during inventory (posting):

Surpluses are items not accounted for in accounting.

The surpluses identified during the inventory process are credited to the fixed assets account (account 01) in correspondence with the account for other income and expenses (account 91). Acceptance of surpluses for accounting is carried out through 08 account, the same as in the case of receipt of fixed assets. Postings for accepting surplus look like: D08 K91/1 and D01 K08. Such fixed assets are accepted at the average market value as of the current date.

Write-off of shortages during inventory counting (postings):

The identified shortage is written off from account 01 to the debit of account 94 “Shortages and losses from damage to valuables.” When decommissioning an object, you must complete three steps:

1 – write off the accrued depreciation on the missing object from account 02 (entry D02 K01/2),

2 – write off the original cost of the missing object from account 01 (entry D01/2 K01/1),

3 – write off the residual value of the missing item from account 01 (entry D94 K01/2).

In order to write off an object, it is necessary to open subaccount 2 on account 01, transfer the initial cost of the missing object to its debit, and accrued depreciation to its credit. After that, the residual value of the loan account 01/2 will be determined, which must be written off as a deficiency.

1 – the culprit has not been identified, in this case the shortage is written off as other expenses using entry D91/2 K94. In this case, there must be documentary evidence of the absence of the perpetrators or a refusal to recover damages from the perpetrator.

2 – the culprit is identified, in this case the shortage is written off to the debit of subaccount 2 of account 73 “Settlements with personnel for other operations” by posting D73/2 K94. Next, the employee either deposits the shortage in cash (entry D50 K73/2) or it is deducted from his salary (entry D70 K73/2). If the market value of the missing item is recovered from the guilty person, then the difference between the amount of the deficiency and the market value is charged to account 98 “Deferred income”.

Postings during inventory of fixed assets:

Transfer of fixed assets to conservation

Mothballing of fixed assets is the cessation of operation of an object for any period of time with the possibility of its resumption. Conservation is a set of measures aimed at ensuring the safety of an object for a long time.

Conservation may be applicable if an object is idle and not used for some reason, and management may decide that it would be more profitable to mothball the object for the required period, thereby providing it with the proper conditions for preservation.

The preservation period of a fixed asset cannot be less than three months.

Depreciation is not charged for mothballed assets. Depreciation should stop accruing from the first month following the month of transition to conservation.

If a situation occurs that the object is decommissioned in less than 3 months, for example, after 2 months, then depreciation will have to be calculated for these 2 months.

The procedure for transferring fixed assets to conservation

At the initial stage of preparation for conservation, an inventory of fixed assets is carried out, the actual availability of objects with accounting data is checked. Inventory is necessary to identify fixed assets that are currently not in use. It is more economically profitable to transfer such objects to conservation, thereby ensuring their safety.

The procedure for transferring to conservation is carried out with the help of a commission specially created for these purposes. The commission may include employees of the enterprise, representatives of the management team, etc. The commission draws up a list of idle facilities, checks them, makes a decision on the mothballing of fixed assets, sets the mothballing period, and draws up the necessary documentation.

First of all, the head of the enterprise draws up a conservation order, which contains a list of unused objects. The order is drawn up in any form.

Another of the main documents is the act of conservation of the object, which is drawn up and signed by the members of the commission. Since the State Statistics Committee has not established a standard form of the act, the organization itself develops the form of the act in accordance with its needs.

When establishing a deed form, you need to follow certain rules and include the necessary details in the form. As a rule, the conservation act contains the following information:

• Number and date
• Name of the object, its purpose
• Inventory number of the fixed asset
• Initial cost (or replacement cost if revaluation was carried out)
• Residual value
• Accrued depreciation
• Useful life
• Reasons for transferring to conservation
• Preservation period of the fixed asset

After the commission members sign the act, it is sent to the manager for approval.

You can make a note on the inventory cards about transferring the object to conservation; it is more convenient to do this in the 4th section.

After the object is removed from its mothballed state, depreciation should continue to be calculated, and its useful life will be extended for the duration of its mothballing. Depreciation should begin to be calculated on the first day of the month following the month of re-opening.

Accounting for asset conservation

Objects of fixed assets are accepted for accounting on the debit of account 01. When transferring a fixed asset for conservation, a separate sub-account “Fixed assets for conservation” is opened on account 01. The mothballed object is transferred there by wiring D01.OS for conservation K01.OS in operation.

When depreservation occurs, reverse wiring is performed.

Conservation costs:

When preparing an object for conservation and transferring it to long-term storage, some costs arise, which are taken into account as other costs in the debit of account 91/2. Costs may also arise during depreservation as well as during storage.

Posting for writing off the costs of conservation of the OS: D91/2 K20 (23, 10, 70, etc.).

Repair of fixed assets

Repair of fixed assets may be required at any time. Equipment does not last forever and may become damaged or broken. If the equipment cannot be restored, then it should be written off, but if the operational properties of the object can be restored, then repairs are carried out.

Repair or reconstruction?

Restoration of an object can be carried out in two ways: current repairs and major repairs (reconstruction, modernization). These two concepts are sometimes confused or considered the same process. However, accounting and tax accounting for current and major repairs of fixed assets is different. It is important to decide at the initial stage how the object will be restored: repaired or reconstructed.

When carrying out routine repairs, the properties and characteristics of the object that were before the breakdown are restored. That is, the technical and economic indicators of the fixed asset do not change; only the faults that have arisen are eliminated or preventive work is carried out to prevent these faults. That is, repairs are aimed primarily at maintaining the standard operating condition of the fixed asset. Repair costs are written off as expenses in the current tax period.

When carrying out a major overhaul (reconstruction or modernization), the characteristics of the object improve, it becomes better, more powerful, more productive, more modern. The changes are more global and, in general, are characterized by an improvement in the technical and economic indicators of the facility. At the same time, all costs for major repairs increase the initial cost of the property.

That is, the mechanism for accounting for costs in both cases is fundamentally different; in order to ensure that the tax authority does not have unnecessary questions in the future, it is necessary to clearly define what type of work is being carried out on the object and where the costs must be attributed.

Accounting for the cost of repairing fixed assets (wiring)

Repair work can be carried out either by the enterprise itself or by involving third-party contractors with whom a contract is concluded. In the first case, the method of carrying out repairs is called economic, the second - contracting.

Depending on how an organization chooses to repair its assets, costs will vary somewhat.

Whatever the source of costs, the costs of repairing fixed assets are attributed to the increase in the cost of products and goods.

Postings for writing off expenses for repairs performed on your own:

• D 23 K10 – posting for the write-off of materials necessary for repairs from the warehouse
• D23 K70 – posting for payroll for workers involved in repairs of the facility
• D23 K69 – entry for the calculation of insurance premiums from the salaries of workers engaged in repairs of the facility
• D20 K23 – repair costs are included in production costs

Postings for writing off costs for repairs performed by contract:

• D 20 (23, 25, 26, 44) K60 (76) – entry for attributing the cost of work performed to the cost of production for manufacturing enterprises (into sales expenses for trading enterprises)
• D19 K60 – VAT is allocated from the cost of work performed by the contractor
• D68.VAT K19 – VAT is sent for reimbursement from the budget
• D60 (76) K50 (51) – payment to the contractor for work performed

Reserve for repairs of fixed assets in accounting (entries)

Large enterprises for which repairs are a frequent operation and/or repair costs are significant, form a special reserve in advance. The creation of a reserve for the repair of fixed assets occurs gradually, from month to month. In accounting, account 96 “Reserve for future expenses” is used for this. The formation of a reserve for repairs occurs on loan account 96 through the gradual inclusion of certain amounts in the cost of production.

Postings to create a reserve for repairs of fixed assets: D20 (23, 25, 26) K96.

When there is a need to repair an object, a posting is made to write off costs from the reserve: D96 K10 (70, 60, 76, 69 ...).

The monthly amount deducted to the reserve is determined as 1/12 of the annual cost of repairs according to the estimate.

If the amount of the formed reserve is not enough to carry out repair work, then the missing funds can be obtained either by deducting additional funds to the reserve (entry D20 K96), or by attributing these costs to the cost of production (entry D20 K10, 70, 60).

If the amount of the formed reserve exceeded the annual costs of repairs, then the remaining funds on the loan are written off to the organization’s income using posting D96 K91/1.

At the end of the year, the balance on account 96 is 0.

Modernization and reconstruction of fixed assets

In the process of using fixed assets, equipment can break down, lose its operational properties, and become morally and physically obsolete. To restore the properties and characteristics of fixed assets, repairs are carried out. If, in the process of repair work, the object is improved, it becomes more functional, more efficient, that is, its technical and economic indicators generally improve, then this will no longer be just a repair, but a reconstruction or modernization.

The difference between reconstruction and repair

It is important to recognize the differences between routine maintenance of fixed assets and modernization or reconstruction. The cost accounting mechanism is different in both cases, so it is necessary to determine at the initial stage how the fixed asset will be restored.

During the repair process, the functions and properties of the object are restored that they had at the initial stage of operation, that is, the object does not become better than it was. Just repairing breakdowns and damage.

If, in the process of carrying out repair work, replacing parts and components of equipment, the fixed asset has become more powerful, more functional, its productivity has increased, and the layout has improved (for real estate), then this is already modernization and reconstruction. And costs need to be taken into account differently.

Maintenance costs are included in the cost of production or selling expenses. Expenses for modernization, reconstruction, completion, and additional equipment increase the initial cost of the OS.

So, modernization is characterized by an increase in productive capacity, an increase in the book value of fixed assets and useful life, and a change in depreciation parameters.

Accounting for reconstruction (modernization) of fixed assets

The main feature that distinguishes reconstruction from repair is the improvement of the technical and economic indicators of the object. From an economic point of view, the main asset becomes more profitable for operation. During the process of reconstruction (modernization), new properties and functions of an object may appear.

Documenting:

If an enterprise decides to improve a fixed asset by modernizing it, then the manager issues an order (instruction) in which he establishes which object is subject to major repairs, what the deadlines for the work are, and appoints responsible persons.

A defective statement is filled out for the OS facility indicating the reason for the need for modernization.

If the work is carried out by contract, then an agreement is concluded with the contractor, which describes the timing of the work, and also provides a list of what needs to be done. Estimate and technical documentation is drawn up.

The OS is transferred for modernization and reconstruction on the basis of an invoice for internal movement (form OS-2). This form is issued if the OS will be repaired by the organization itself. If third parties are involved for this, then the transfer and acceptance act OS-1 is used.

The modernized, reconstructed object is accepted back into accounting on the basis of the acceptance certificate in the OS-3 form.

Information about major repairs and associated costs is reflected in the facility’s inventory card.

Cost accounting entries:

All expenses for modernization and reconstruction are attributed to the increase in the initial cost of the fixed asset.

Just as when an asset is received by an enterprise, all costs for work performed are collected in the debit of account 08, after which they are transferred to the debit of account 01.

Postings when modernizing (reconstructing) fixed assets on your own:

• D08 K10 – materials necessary for modernization (reconstruction) were written off
• D08 K70 – wages accrued to employees involved in the reconstruction process
• D08 K69 – insurance premiums are calculated from the salaries of these employees
• D08 K23 – expenses of auxiliary production are written off
• D01 K08 – the cost of fixed assets has been increased by the amount of costs for modernization and reconstruction

Postings during reconstruction (modernization) of fixed assets by contract:

• D08 K60 (76) – reflects the cost of work by third-party organizations
• D19 K60 (76) – VAT is allocated from the cost of work performed
• D01 K08 – the cost of fixed assets has been increased by the amount of expenses taken into account

As the cost of fixed assets increases, monthly depreciation deductions will also increase; this must be taken into account when calculating depreciation.

It should also be noted that in connection with the improvement of the technical and economic indicators of the OS object, the useful life may be increased. The need for this is determined by the management of the organization and the commission that controls the process of modernization (reconstruction).

Disposal of fixed assets from the enterprise

A fixed asset can leave an enterprise in several ways and for various reasons. An object can be sold, donated, contributed to the authorized capital of another organization, or written off due to moral or physical wear and tear. We will analyze each method of disposal of a fixed asset, how an object is deregistered, and what entries for writing off a fixed asset should be made by an accountant in each case.

Write-off of fixed assets as a result of physical or moral wear and tear

If a fixed asset is physically worn out, its useful life has expired, it is obsolete or damaged so much that it cannot be used for further use, then it must be written off, that is, deregistered.

Before writing off an OS, it is necessary to assess its condition, the possibility or impossibility of its further operation. This assessment is carried out by a special commission. If the commission decides to write off an object, then the manager issues an order on the need to write off the fixed asset. In this case, a write-off act is drawn up in the form OS-4, OS-4a or OS-4b, on the basis of which the accountant makes entries to deregister the fixed asset and makes a note about the write-off in the inventory card OS-6, OS-6a or OS- 6b.

When an asset is disposed of in this way, its residual value is written off from the 01 account on which the object is listed. The residual value is calculated by subtracting the amount of accrued depreciation from the original (replacement) cost. Initial – this is the cost at which the fixed asset was accepted for accounting on account 01 upon receipt. Replacement value is the value obtained as a result of revaluation. Accrued depreciation – all accumulated depreciation charges as of the write-off date, recorded on the loan account 02, are taken.

The procedure for writing off fixed assets is as follows:

1. On account 01, an additional subaccount 2 “Disposal of fixed assets” is opened. In this case, subaccount 1 will include operating systems
2. A posting is made to write off the original (replacement) cost: D01/2 K01/1
3. A posting is made to write off accrued depreciation: D02 K01/2
4. In subaccount 2, the residual value of fixed assets has formed (the difference between debit and credit), which is written off as other expenses by posting D91/2 K01/2

If the object is fully depreciated, its useful life has ended, then the residual value will be equal to 0 (the debit of subaccount 2 account 01 is equal to its credit).

Expenses for writing off fixed assets, for example, for dismantling, are also written off as other expenses (D91/2 K70, 69, 76).

Parts, spare parts, materials remaining after dismantling the OS facility and subject to further use are accounted for at the average market value as material assets (D10 K91/1).

Based on the results of the write-off, a financial result is formed on account 91; in the event of a profit, posting D91/9 K99 is made; in the event of a loss, posting D99 K91/9 is reflected.

Postings when writing off a fixed asset:

Sale of fixed assets

If disposal as a result of write-off is formalized by a write-off act, then disposal of a fixed asset through sale is formalized by an acceptance and transfer certificate, form OS-1, OS-1a, OS-1b.

If for an enterprise the sale of fixed assets is an isolated case and is not a regular type of activity, then the income and expenses associated with the sale are reflected in account 91 (in contrast to the sale of goods, which are reflected in account 90 “Sales”).

When selling a fixed asset to a third party, the residual value of the object is written off in the same way, posting:

D01/2 K01/1 – the initial cost of the fixed assets has been written off,

D02 K01/2 – depreciation on this fixed asset is written off.

D91/2 K01/2 – the residual value of fixed assets intended for sale has been written off.

D91/2 K70 (69, 76) – related expenses are reflected.

Revenue received from the sale of fixed assets is reflected in the credit of account 91 in the first subaccount, the posting looks like:

D62 (76) K91/1 – revenue from the sale of fixed assets is reflected.

The sale of a fixed asset is an operation subject to VAT. The price at which the property is sold to the buyer must include value added tax. The VAT amount is reflected by posting D91/3 K68.nds.

Based on the results of the sale, a financial result is formed on account 91, which is reflected in one of the postings:

D99 K91/9 – loss from the sale of fixed assets is reflected (if expenses exceeded revenue).

D91/9 K99 – profit from the sale of fixed assets is reflected (if the proceeds from the sale exceeded expenses).

Postings when selling a fixed asset:

Free transfer of fixed assets (donation)

The donation of a fixed asset is equivalent to the sale, therefore the mechanism for disposal of fixed assets is similar to the sale.

In the same way, the residual value is written off to the debit of account 91/2. This includes all associated costs.

Since the object is being transferred free of charge, there will be no revenue in this case. However, VAT must be charged. VAT is calculated based on the average market value of the fixed asset on the date of transfer.

The loss received from the gift is reflected by posting D99 K91/9.

Postings for the gratuitous transfer of fixed assets:

Contribution of fixed assets to the authorized capital of another enterprise

Let's consider another way to dispose of fixed assets - adding it to the authorized capital of another organization. The transfer is similarly formalized by an act of acceptance and transfer.

Contribution of fixed assets to the authorized capital is considered a financial investment of the enterprise in order to receive income in the form of dividends, therefore account 58 “Financial investments” is used to reflect this operation.

Initially, postings are made to write off the original cost and depreciation: D01/2 K01/1 and D02 K01/2.

The posting for the transfer of fixed assets to another enterprise has the form: D76 K01/2, which is carried out for the amount of the residual value of the fixed assets.

In this case, a debt is formed for the contribution to the authorized capital, which is reflected by posting D58 K76.

There is no need to charge VAT on the cost of fixed assets, since this operation is not equated to a sale, but is considered an investment of the enterprise.

Postings when adding a fixed asset to the capital of another enterprise:

Rental of fixed assets

When transferring fixed assets for temporary use from one organization to another, it becomes necessary to account for the lease of objects from both the lessor and the lessee.

The property is transferred on the basis of a lease agreement, which specifies the details of the parties (lessor and tenant), as well as the period for which the property is transferred. When transferring fixed assets for a period of less than 12 months, we observe a short-term lease, for a period of more than 12 months – a long-term lease. The agreement may also reflect the possibility of transferring ownership of the leased property and indicate the conditions under which this is possible.

Accounting for leased fixed assets must be maintained by both parties to the transaction. With the help of postings, the lessor reflects the transfer of the object for rent, and the lessee reflects their acceptance. Let's figure out what accounting entries for the lease of fixed assets should reflect both parties.

Accounting for the lease of fixed assets from the lessor

The owner of a fixed asset object, for example, equipment, has the right to transfer this equipment for temporary use to another organization. This may be an isolated case, or perhaps the organization specializes in renting out property and for it this kind of operation is a normal activity.

Let's look at both cases, since accounting for expenses and income in both cases is noticeably different.

By the way, despite the fact that the fixed asset has been leased to another company, the object still continues to be listed on the lessor’s balance sheet and, therefore, monthly depreciation must be calculated on it.

To account for the transfer of an asset for lease, a separate subaccount “Assets transferred for lease” is opened on account 01; the transfer of an asset for lease is reflected by posting D01.OS in the lease D01.OS in operation.

The transfer itself is formalized by a transfer and acceptance certificate in the form OS-1, OS-1a or OS-1b.

Lease of fixed assets is the main activity of the enterprise

In this case, account 90 “Sales” is used to account for all income and expenses from rental transactions. The debit of this account collects all expenses related to rent, and the credit income.

Expenses may include monthly depreciation charges, costs of transportation and installation of the facility (if this is at the expense of the lessor), expenses for current or major repairs (again, if this is at the expense of the owner of the equipment) and other related expenses.

The income is the rental payments that the tenant pays to the owner of the property.

The entry for accounting for rental expenses has the form: D90/2 K20, 23, 26 (44).

The entry for accrual of lease payments has the form: D76 K90/1.

Posting for receiving these payments: D51 K76.

Every month, on account 90, the final financial result from the rental is calculated, the profit received is reflected in the posting D90/9 K99, but if expenses exceeded income, then we see a loss, which is reflected in the posting D99 K90/9.

If lease payments include VAT, then it must be separated from the payment amount (entry D90/3 K68.VAT) and paid to the budget (D68.VAT K51).

Leasing an OS is a one-time operation

In this case, account 91 “Other income and expenses” is used to account for expenses and income.

Similarly, debit account 91 collects expenses associated with fixed assets leased out, and credit account 91 collects income.

Postings for accounting for lease of fixed assets:

D91/2 K20, 23, 26 (44) – expenses for renting fixed assets are taken into account.

D76 K91/1 – rental payments accrued.

D51 K76 – payment for OS rental received.

When returning a fixed asset to account 01, a reverse posting is made D01.OS in operation K01.OS in lease. A note is also made in the transfer and acceptance certificate of this OS.

Accounting for a leased asset from a tenant

When receiving any equipment for temporary use from another organization, the organization records it in off-balance sheet account 001. The cost specified in the lease agreement is entered as a debit to account 001.

In this case, the organization can create inventory cards for these fixed assets.

Since the object continues to be listed on the balance sheet of its owner, the lessee does not charge depreciation on it.

The tenant writes off the costs of rental payments using the entry D20 (44) K76, and their payment to the lessor is reflected by the entry D76 K51.

The VAT included in the rental amount is allocated by the tenant with posting D19 K76 and sends it for reimbursement from the budget with posting D68.VAT K19.

If the tenant returns his property to the owner, then in the tenant’s accounting it must be removed from account 001, for which its value is reflected in credit 001.

If the tenant wants to pay lease payments ahead of schedule, then you can use account 97 “Deferred expenses”. Wiring D97 K76 is in progress. After which it is necessary to post monthly D20, 23, 26 (44) K97.

Repair of leased fixed assets

If the property leased requires repairs, they are carried out depending on the conditions specified in the lease agreement.

At the expense of the tenant:

If the tenant repairs the OS on his own, then all repair costs are written off as follows:

D20 (44) K10 – the cost of materials spent on repairs has been written off.

D20 (44) K70 – the accrued wages of employees involved in repairing the leased OS are written off.

D20 (44) K69 – insurance premiums are calculated from the salaries of these employees.

D20 (44) K76 - costs for the services of third-party organizations engaged in repairs are reflected.

D19 K76 – allocated VAT on services of third-party organizations.

D68.VAT K19 – VAT is deductible.

At the expense of the lessor:

If the OS is repaired by its owner, then all of the above entries are made in the lessor’s accounting.

Also, these expenses can be offset against future rental payments, while all expenses associated with repairs and collected in the debit of account 20 or 44 are written off by posting D76 K20 (44).

Redemption of leased fixed assets:

The option to purchase the operating system is usually specified in the lease agreement. In this case, as a rule, the tenant pays the cost of this equipment to its owner (wiring D76 K51). The purchase price is usually reflected in the text of the lease agreement.

Costs associated with the purchase of an object are collected in the debit of account 08, this includes the purchase price (entry D08 K76), as well as rental payments paid previously. These lease payments will be taken into account as accrued depreciation by posting D08 K02.

The purchased object is put into operation, and the accountant makes the posting D01 K08.

Based on materials from: buhs0.ru

Document:

Quotation book on component accounting of fixed assets

QUESTION: Our company is constructing a complex of three buildings, which we plan to use in our own business activities. The buildings are erected sequentially according to a single project. By the time the first building was constructed, a pipeline was connected to it, which in the future will serve all three buildings. The pipeline construction project is provided for by the general design of the complex under construction, but the construction of the pipeline is carried out according to special technical conditions and with the allocation of a separate local estimate.

How to reflect the cost of the pipeline in accounting if all three buildings under construction will be reflected as separate fixed assets?

ANSWER: In this situation, the chief accountant is obviously thinking about whether to distribute the cost of the pipeline between three objects or, without further ado, add the cost of the pipe to the first constructed object.

We will offer the chief accountant a third option, which will seem very unorthodox to many Ukrainian accountants.

We think that in the described situation it would be advisable to record the cost of the pipeline as an independent object (1).

Of course, traditional accounting is quite strict about the objectification of fixed assets and requires that the OS object be characterized by a high degree of both technical self-sufficiency and technological independence. This approach is unambiguously established by P(S)BU 7 “Fixed Assets”. The pipeline, of course, does not meet such strict criteria. After all, in itself it is not technically autonomous and economically significant.

However, the international standards on which the domestic accounting system is based allow, in some situations, a weakening of the conditions for recognition of fixed assets and make it possible to record fixed assets in parts, which are often called components. These parts may be depreciated separately from the main asset.

We use the question asked to us as a reason to analyze the scheme of the so-called component accounting of fixed assets. Further we will not talk about the pipeline, but about fixed assets in general.

P(S)BU 7 mentions the possibility of separate accounting of parts of an object that have different service life.

By order of the Ministry of Finance dated December 14, 2007. No. 1413, additions were made to the Methodological Recommendations for Accounting of Fixed Assets, approved by Order of the Ministry of Finance dated September 30, 2003 No. 561. Along with other things, paragraph 23 was supplemented with the following paragraphs:

“Each part of an item of property, plant and equipment, the cost of which is significant relative to the original and/or book value of the item, may be depreciated separately. To this end, it [(the entity)] allocates the amount initially recognized in respect of an item of property, plant and equipment to its significant parts.

If an entity depreciates separately certain parts of an item of property, plant and equipment, it also separately depreciates the remainder of the item, which consists of those parts of the item that are individually immaterial.”

Thus, along with the criterion of multi-term operation, a new sign of “partial” accounting of fixed assets has appeared in the Ukrainian accounting system: the materiality of the cost of part of the fixed asset. The corresponding procedure is described in more detail in paragraphs 43-46 of IAS 16 “Property, Plant and Equipment”:

“43. Each part of an item of fixed assets, the cost of which is significant relative to the total cost of the item, should be depreciated separately.

44. A business entity distributes the amount initially recognized in relation to an item of fixed assets into its significant parts and depreciates each part separately. For example, it may be advisable to dampen aircraft bodies and engines separately<...>.

45. The useful life and depreciation method of a significant part of an item of fixed assets may be the same as the useful life and depreciation method of another significant part of the same object. Such parts can be combined into a group when determining depreciation charges.

46. ​​If a business entity depreciates separately some parts of an object of fixed assets, it also separately depreciates the remainder of the object. The remainder consists of those parts of the object that are separately insignificant. If an entity's expectations for these parts change, approximation methods(2) may be necessary to amortize the remainder in a manner that faithfully reflects the consumption pattern and/or useful life of its parts.”

There are many examples of component accounting in the accounting literature. Some of them may surprise even the most experienced chief accountants.

Let's say, along with the most common example of separate accounting of aircraft engines, paragraph 13 of M(S)BU 16 mentions the internal walls of a building, which leads to some confusion among the auditors of the Ernst & Young company:

“In some cases, such as aircraft engines that require regular overhaul, it is clear that the best solution is to account for them as separate assets, as they have a different useful life than the aircraft of which they are part. In other cases, such as the interior walls of a building, it is less clear whether they meet the criteria for recognition.”(3)

American commentators on international standards provide an interesting example of separately accounting for a “commercial building roof” that requires several regular replacements throughout the life of the structure(4).

KPMG auditors describe the component mechanism using the example of separate accounting of the stadium building and seating areas:

“For example, Enterprise O is constructing a stadium whose total useful life is 50 years. One of the components of the stadium is seating (spectators), which has an expected useful life of 10 years. The total actual cost of the stadium is 500d. e., including 50d. e., related to seating areas. Accordingly, the cost of the seating component is estimated at CU50.”(5)

If an enterprise does not have data on the cost of a separate part (walls, roofs, engines, etc) of an entire OS object, then it can resort to independent calculations:

“In many cases, an enterprise purchases an asset for a fixed amount, without having information about the actual cost of the individual components of this asset. In our opinion, in such cases, the actual cost of the individual components should be determined in the estimate either by reference to current market prices (if possible), or after consultation with the seller or contractor, or by some other reasonable method of approximation”(5).

The IAS-IFRS system makes it possible to identify as components not only individual physical elements, but also aggregates of future costs. This scheme is regulated by paragraph 14 of IAS 16:

“A condition for extending the life of an asset (such as an aircraft) may be that regular basic technical inspections are carried out to identify faults, regardless of whether parts of the asset are being replaced. When a significant inspection is performed, the cost of the inspection is recognized in the carrying amount of the item of property, plant and equipment as a replacement if the recognition criteria are met. Any remaining carrying amount of previous inspection costs (as opposed to physical parts) is derecognised. This occurs regardless of whether the previous inspection costs were identified in the transaction in which the property was purchased or constructed. If necessary, the estimated cost of a future similar inspection can be used as an indicator of what the cost of the existing inspection component was at the time the facility was purchased or constructed.”

This is how this accounting policy is disclosed in the financial report of British Airways plc for 2006:

“Overhaul costs, including replacement parts and labor costs, are capitalized and amortized over the average expected time between major overhauls.”

How can such things be reflected in accounting?

The example given in the KPMG audit manual is quite eloquent: “For example, the business of enterprise P is associated with merchant shipping, and it recently purchased a new vessel for CU 400. The useful life of the vessel is 15 years, but every three years the vessel will be installed into dry dock for major repairs. At the date of acquisition of this vessel, the estimated cost of drydocking similar vessels after three years of service is CU80. Therefore, for accounting purposes, the actual cost of the drydocking component of the vessel is CU80 and this amount will be depreciated within six years until the next time the ship is put into dry dock. The remaining carrying amount that may need to be divided into additional components is CU320. Any additional components will need to be depreciated over their own estimated useful lives.”(5)

If we continue the example and assume that after three years the actual cost of major repairs will be CU 95, then within the framework of the Ukrainian Chart of Accounts the above case will look like this:

Operation	debit	credit	Amount, units
Capitalization of the object “Vessel”:	15	63	400
Recognition of components of the “Ship” object:
1. Dry docking	10	15	80
2. Ship	10	15	320
Depreciation of the “Dry dock” component:
- 1st year	23	13	26,7
- 2nd year	23	13	26.7
- 3rd year	23	13	26,6
Decommissioning of the “Dry docking” component	13	10	80
Actual costs for overhaul of a vessel in dry dock.	15	63	95
Knowledge of the “Dry Docking” component	10	15	95

The actual cost of overhauling the vessel in the amount of CU95 will then be depreciated over three years. Until the next overhaul.

To many practitioners, such a system seems rational and effective.

Regarding the possibility of maintaining separate records of “regular major” and “major” inspections, as well as major repairs in the above format, the following can be noted.

The current national standardization system does not directly provide for such a mechanism.

At the same time, this accounting algorithm, in our opinion, does not contradict the general tenets of P(S)BU.

Therefore, if our aviators and shipping suddenly take a liking to such an accounting scheme, it is unlikely that anyone will have the conscience to reproach them for using methods recognized by international standards.

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1) Unless, of course, the developer transfers this pipeline to the balance sheet of some service organization.

2) The approximation will manifest itself in the averaging of the service life of “insignificant” elements.

3) Application of IFRS: in Part 3: Transl. from English - 2nd edition, ed. - M.: Alpina Business Books, 2008. - P. 930-931.

4) IFRS-2005. Interpretation and Application of International Accounting and financial Reporting Standards. Barry J. Epstein, Abbas A. M. Mirza. JohnWiley-&Sons, Inc. 2005.- P. 205.

5) IFRS: KPMG's point of view. A Practical Guide to International Financial Reporting Standards prepared by KPMG. 2007/08: In 2 hours. Part 1 / Transl. from English - 4th ed. - M.: Alpina Business Books, 2008. - P. 295.

IFRS (IAS 16): Accounting for individual parts of a property, plant and equipment

30.03.2011

Question: In 2007, the company purchased a forging press with an expected life of 8 years. The press includes two identical pumps, for which the service life was set at 8 years, similar to the press. Pumps were not recognized as separate items of property, plant and equipment. In March 2011 one pump failed and was replaced. How to correctly determine the value of the disposed part of a fixed asset?

Answer: IAS 16 “Property, Plant and Equipment” contains only one paragraph containing the criteria for recognizing an object as a fixed asset. The cost of an item of property, plant and equipment is recognized as an asset only if:

(a) it is probable that future economic benefits associated with the item will flow to the entity;

(b) the cost of the item can be measured reliably.

This means that subsequent expenses, that is, capital repair expenses, must meet the same criteria to be recognized as a component of an asset.

The component components of an asset must be identifiable so that the cost of the new component of the asset can be recognized as an asset (that is, capitalized as part of the asset) and the replaced component can be written off. Replacement of components of a fixed asset (overhaul) must be clearly separated from regular maintenance. However, IAS 16 does not contain a separate definition of capital repairs, and also does not contain a definition of a component of a property, plant and equipment to which this standard can be applied.

IAS 16 requires that “significant” components of a single asset be depreciated separately. These are components whose cost is significant in relation to the total cost of the asset. The useful life and depreciation method of one significant component of an item of property, plant and equipment may closely match the useful life and depreciation method of another significant component of the same item. Such components can be combined into groups when determining the amount of depreciation. An entity must separate significant components of an asset upon initial recognition, but the standard does not require separating components of an asset.

IAS 16 requires a component of an asset to be written off when it is replaced, regardless of whether it was depreciated separately from the asset or not, and also allows the current value of the replaced component of an asset to be measured. If it is not possible for an entity to determine the carrying amount of a disposed component of an asset, it may use replacement cost (the cost of a new component) to determine the value of the disposed component at the date of its acquisition or construction. Consequently, a company may not account for the components of an asset until capital expenditures are incurred.

Thus, the cost of the retired pump, which was not separately determined when the forging press was initially recognized, can be determined at the date of disposal of the pump based on the cost of the new pump, taking into account accumulated depreciation from the date of registration of the press until March 2011. If it is possible to obtain information from the pump supplier (or other sources) about the cost of a similar pump in 2007, then this cost, taking into account accumulated depreciation, should be used to calculate the current value of the retired pump.

Component accounting

As part of the review of the application of international financial reporting standards in 2004, component accounting requirements were established to reflect depreciation of fixed assets. Component accounting (or component requirement) regulates the separate accounting of each element of a fixed asset object if its value is significant in the total cost of this object. Once components have been identified and their useful lives have been determined, salvage value must be determined and the appropriate depreciation method selected. If individual elements of an item of property, plant and equipment have the same useful life, they can be grouped for depreciation purposes.

In accordance with the requirements of IFRS 16, depreciation is the distribution of the depreciable cost of an asset between accounting periods over its useful life.

The method used must be consistent with the scheme for obtaining economic benefits from the fixed asset item. If the income from the operation of a fixed asset is distributed evenly over its useful life, it is recommended to use the straight-line depreciation method. If, over the course of its service life, the return from the use of an object gradually decreases, it is advisable to use the declining balance method. The sum of items method is recommended to be used if the decrease in the depreciable cost of an object is proportional to the volume of products produced or work performed.

Currently, more and more enterprises are introducing component accounting in accordance with IFRS requirements.

As part of the review of the application of international financial reporting standards in 2004, component accounting requirements were established to reflect depreciation of fixed assets. Component accounting (or component requirement) regulates the separate accounting of each element of a fixed asset object if its value is significant in the total cost of this object. Once components have been identified and their useful lives have been determined, salvage value must be determined and the appropriate depreciation method selected. If individual elements of an item of property, plant and equipment have the same useful life, they can be grouped for depreciation purposes.

The valuation of aircraft is a clear illustration of the application of the component approach to fixed asset accounting. Aircraft airframes and engines are often purchased from different manufacturers and have different repair and maintenance requirements. The service life of an aircraft engine is significantly shorter than that of the airframe; The engine requires regular replacement to keep the aircraft airworthy. Defining the engine as a component allows depreciation to be charged over its useful life and fully depreciates the cost of the engine to zero or salvage value at the replacement date. The component is then derecognised and the cost of the replaced component is capitalized when a new engine is installed.

In accordance with the requirements of IFRS 16, depreciation is the distribution of the depreciable cost of an asset between accounting periods over its useful life. There are several recommended methods for calculating depreciation of fixed assets under IFRS 16:

• straight-line accrual - uniform accrual of a constant amount of depreciation over the useful life of the object;
• declining balance - the accrual of the largest amounts of depreciation in the initial periods of use of the object and a gradual decrease in the amount of depreciation over its useful life;
• amount of products - calculation of depreciation amount depending on the expected production of labor products at the operated fixed asset facility.

The method used must be consistent with the scheme for obtaining economic benefits from the fixed asset item. If the income from the operation of a fixed asset is distributed evenly over its useful life, it is recommended to use the straight-line depreciation method. If, over the course of its service life, the return from the use of an object gradually decreases, it is advisable to use the declining balance method. The sum of items method is recommended to be used if the decrease in the depreciable cost of an object is proportional to the volume of products produced or work performed.

Depreciation charges should be determined separately for each significant component of property, plant and equipment, and the method of calculating depreciation of property, plant and equipment should be reviewed periodically. If there have been significant changes in the expected pattern of obtaining economic benefits from an asset, the method of calculating depreciation should be changed accordingly. Those fixed assets whose consumer properties do not change over time, for example land, are not subject to depreciation.

Currently, more and more enterprises are introducing component accounting in accordance with IFRS requirements.