The article describes the accounting approach to the classification of long-term assets. It is shown that the classification of long-term assets in the accounting system is important for their evaluation. The current standards provide for three approaches to property valuation: at initial cost, at the current recovery cost, and at the current recovery cost.
Keywords:classification of fixed assets, assessment of fixed assets, reassessment, depreciation.
Fixed assets are the resource making the production capacity of the organization and defining its ability to turn out competitive products. Fixed assets possess an important role in the course of production; they can have certain reserves, which are capable to provide gain of products in the forthcoming period. Important characteristics of fixed assets for the analysis and adoption of management decisions are assessment and classification signs. This article considers these questions.
Fixed assets represent owner's equity of firms withdrawn by them from circulation. These are assets with period of use more than 12 months. As fixed assets have a big variety of types and elements, for ensuring purposeful management of them the organization faces by a problem of their classification.
Now there are many classifications of fixed assets. If to speak about the Kazakhstan accounting, then classification of fixed assets by the following signs is used:
– by functional types in terms of representation in the balance sheet: intangible assets, fixed assets, long-term financial investments, deferred tax assets, other;
– by functional types in terms of Book of accounts: fixed assets; intangible assets; biological assets; prospecting and estimated assets; deferred tax assets;
– on the nature of possession: own, leased, received in expeditious use, trust management;
– on communication with the land: movable and immovable non-current assets.
Questions of assessment of fixed assets are relevant. Assessment is necessary for determination of the price of the transaction of purchase and sale, mortgage cost when crediting, when determining deposits to authorized capital, during the restructuring of the organization, preparation of business plans, revaluation of the enterprises, determination of cost of the stock of shares, implementation of issue of shares, liquidation of the organization and other cases.
In domestic accounting with transition to market economy, the following types of estimates of fixed assets began to be applied.
1) At initial cost. All fixed assets are accepted to accounting by this assessment. It is formed identically for fixed assets, intangible assets and long-term financial investments and depends on a source — acquisition for a payment, introduction on account of a contribution to authorized capital, gratuitous receiving, creation by own forces or by forces of the contractor.
2) At residual cost. It is applied to fixed assets and intangible assets.
3) At the current recovery cost which is understood as the cost of reproduction (replacement) of an object in the conditions of the reporting period taking into account a physical state and obsolescence.
For determination of recovery cost the procedure of revaluation is carried out. In accounting, the term «revaluation» means change of registration cost, that is initial assessment of this or that object. Revaluation is carried out in several steps. The first stage defines the purpose of assessment and a type of the determined cost, the second stage defines the preliminary plan of estimated actions and also the list of the estimated property, and at last, the final stage makes direct assessment of assets (a markdown or revaluation) with the subsequent reflection of data in accounting and financial statements. [1, p. 106]
Revaluation, according to a fair remark of Fomicheva L. P. [2, p. 1], represents not actually the fact of change of cost of an asset, but the decision on reflection of this fact in accounting. Users of accounting information are interested in obtaining objective data on the cost of property of the organization. Therefore revaluation is of particular importance in the conditions of inflation when recovery project cost considerably deviates its initial cost (historical assessment). The more in the organization the asset is used, especially it is probable that during this term its cost will change.
According to the legislation on accounting the commercial organization can change the initial cost of the following fixed assets at revaluation:
– groups of uniform objects of fixed assets on the current cost. Revaluation is carried out not more often than once a year for the end of the reporting period;
– groups of uniform intangible assets on the current market value determined only according to the active market of these objects. Check (testing) for depreciation in the order determined by IFRS 36 «Depreciation of assets» is allowed;
– long-term financial investments. Financial investments by which it is possible to determine the current market value are reflected in accounting reports for the end of reporting year at the current market value. Financial investments by which the current market value is not determined are checked for the end of the reporting period (tested) for depreciation. With signs of depreciation the reserve under depreciation is created and these financial investments are reflected in accounting reports under estimated cost;
– profitable investments in material values. Can be overestimated similar to objects of fixed assets.
Revaluation of investments is not provided by normative legal acts on accounting in fixed assets. Thus, only fixed assets, profitable investments in material values and intangible assets are exposed to revaluation. Comparing conditions of revaluation of objects of fixed assets and intangible assets it is possible to tell that the main difference as their revaluation are the recalculated indicators. Revaluation of intangible assets is made by recalculation of their residual cost, and revaluation of fixed assets — by recalculation of initial (recovery) cost and the saved-up depreciation. For the rest conditions of revaluation remain identical.
Depreciation of assets represents depreciation of an asset owing to physical wear, moral obsolescence and also influence of other factors. Separate standard 36 «Depreciation of assets» is devoted to depreciation of assets. It is used for more exact, more reliable providing data on a financial position of the company and also describes process of identification of cases of depreciation of assets and their reflection in account and also requirements to disclosure of the relevant information in the reporting [3, p. 1].
According to IFRS 36 depreciation, as well as revaluation, have to be carried out for each reporting date. First of all, signs of depreciation to which refer come to light:
– moral obsolescence and physical wear;
– the happened or expected significant changes which are negatively influencing the company;
– depreciation of an asset during the reporting period;
– significant changes in technology, economic conditions, the legislation.
With signs of depreciation on special technology will be executed a markdown of cost of fixed assets. [1, p. 143]
Undoubtedly, issues of depreciation of fixed assets require the solution at the methodological level of standard regulation of accounting. The domestic standard devoted to depreciation of assets, the analog by IFRS 36 is necessary for the Kazakhstan registration practice.
References:
1. Поленова, С. Н. Международные стандарты учета и финансовой отчетности / С. Н. Поленова, Н. А. Миславская. — М.: Дашков и К, 2017. — 372 с.
2. Фомичева, Л. П. Учет добавочного капитала / Л. П. Фомичева // Бухгалтерский учет. — 2009. — № 4. — С. 20–25.
3. Макарова, Ю. Ю. Обесценение активов в соответствии с МСФО / Ю. Ю. Макарова // Финансовые и бухгалтерские консультации. — 2009. — № 4. — С. 66–69.
