• Depreciation of fixed assets
  • Lease accounting of fixed assets
  • Accounting of equipment requiring assembly
  • Intangible assets and their depreciation
  • Chosen methods of inventories accounting
  • Accounting of inventories acquisition
  • Useful life of items of fixed assets




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    Useful life of items of fixed assets




    1. Useful life of items of fixed assets is determined basing on expected physical depreciation depending on operation conditions, natural conditions and aggressive environment impact, system of repairs conducting. Useful life of items of fixed assets is determined within the frameworks approved by the Resolution of the Government of the Russian Federation No. 1 dated 01.01.2002 relating to the list approved by the Director of the Company or authorized person.

    2. Useful life of the fixed assets received in the result of reorganization of the Company in a form of affiliation and put into operation by reorganized companies till 01.01.2002 is determined in accordance with standards approved by the Resolution of the Counsel of Ministers of the USSR No. 1072 dated October 22, 1990.

    3. Useful life of items of fixed assets is determined at their acceptance to accounting on the grounds of the certificate of an item, other technical documents or on the grounds of estimate of technical services of the Company and its subdivisions in compliance with the internal documents, on the grounds of the resolution of the permanently acting committee. Useful life is fixed in the inventory card (ОС-6).

    4. Useful life of items of fixed assets is reconsidered in case of improvement (increase) of initially accepted standard indicators of the item operation after performed further construction, further equipping, reconstruction or upgrading. In this case useful life of fixed assets срока can be extended within the terms determined for amortization group, in which this fixed asset is included.

    5. Determination of useful life of items of fixed assets previously used by another organisation is performed basing on the remained useful life of fixed assets or another expected useful life determined taking into account:

    1. expected useful life in the organisation of this item in compliance with expected productive capacity or power;

    2. expected physical depreciation depending on operation conditions; natural conditions and aggressive environment impact, system of repairs conducting;

    3. regulatory and legal and other restrictions of use of this item.

    1. On the grounds of documentary confirmation expected useful life of fixed assets is determined by the committee and approved by the Head of the relevant structural subdivision (branch), in which this item will be operated at acceptance of an item to accounting as the fixed assets.




        • Depreciation of fixed assets




    1. Cost of fixed assets is repaid by accrual of depreciation charges within the term of their useful life.

    2. The Company applies a linear method of depreciation of fixed assets. Depreciation on each inventory item is accrued monthly by application of the established norms estimated depending on term of useful life of an item.

    3. Accrual of depreciation of the property received by the Company under the lease contract and booked on its balance, can be performed using the diminishing balance method, if it is provided by the contract.

    4. The Company can apply decreasing (increasing) ratios to the existing standards of depreciation charges on fixed assets purchased under the lease contract, if ratios are stipulated by conditions of the lease contract.

    5. Real estate items, on which capital investments are completed, the corresponding source accounting documents of acceptance-transfer are drawn up, documents are passed to the state registration and actually maintained, are accepted to accounting as the fixed assets and stand apart in the analytical account.

    6. At accrual of depreciation on donated fixed assets as well as on fixed assets purchased with attraction of means of target financing, simultaneously with write-off of depreciation amount in the same proportion, the part of income of the future periods is recognized as other income of the Company.

    7. Depreciation is not accrued:

    1. on item of fixed assets used for exercise of the law of the Russian Federation relating to mobilization preparation and mobilization, which are put in dead storage and not used in production, at performance of works or rendering services, for management needs of the organization or for granting by the organization for payment in temporary possession and use or in temporary use,

    2. on items of fixed assets, which consumer properties do not change in the course of time (land plots; natural resources sites; objects referred to museum items and museum collections etc.).

    3. on housing facilities, which do not bring profit;

    1. Whereas:

    Depreciation is accrued in accordance with the generally established procedure on housing facilities, which are accounted as interest-bearing investments in material valuables.

    If housing facilities are used for deriving income other than by transfer to rent and satisfy the requirements of recognition as fixed assets, they are included in fixed assets and depreciation is accrued on them in accordance with the established procedure.



    1. Accrual of depreciation is suspended:

    1. on fixed assets transferred to dead storage. As dead storage the Company recognizes the temporary termination of an item operation for the term of more than three months. Expenses for dead storage (checkup, greasing, enclosing etc.), as well as on temporary termination of operation of items up to three months are recognized by the Company as miscellaneous expenses;

    2. for the period of reconstruction and upgrading, capital repairs of items of fixed assets, if duration of works exceeds 12 months.

    1. On the specified objects the depreciation is terminated in the month following the month of transfer, and starts in the month following the month of putting these items into operation.

    2. On property in stock (reserve), which is not transferred to dead storage, accrual of depreciation is performed according to the standard procedure.




        • Lease accounting of fixed assets




    1. The Company (Lessor) can lease out the fixed assets purchased for its own operating activity or for management needs. These fixed assets are booked on the account "Fixed assets" but stand apart in the analytical accounting.

    2. Expenses for routine repairs are recognized as the Company’s expenses, if the lease contract provides routine repairs for the Lessor’s account, otherwise the Lessor is obliged liable to support property in the serviceable condition and effect routine repairs for own account.

    3. The Lessor is liable to effect at own expense capital repairs of the leased out property, if otherwise is provided by the law, other legal acts or the lease contract. In this case Lessor's expenses for capital repairs of leased out property are related to the expenses connected with receiving income on lease.

    4. In accordance with the concluded contract the Company (Lessee) can lease fixed funds belonging to other owners. This property is recorded on the balance account 001 «Leased fixed assets» accoding to the value specified in the lease contract net of VAT. If the lease contract does not contain property value, the property value is defined as the amount of annual lease payments net of VAT.

    5. The Lessor is liable to support property in the operating condition, to make routine repairs at own expense and to bear expenses on the maintenance of property, otherwise is provided by the law and the lease contract. The specified expenses are reflected on the same accounts of expenses as expenses for lease of fixed assets.

    6. The separable improvements of the leased out property performed by the Company (Lessor) for its own account and without the Lessor’s consent for compensation of the effected expenses, are the Lessor’s property. Useful life on such property is determined in accordance with the generally established procedure (in compliance with the internal documents of the Company on the grounds of the resolution of the permanently operating committee).

    7. Cost of the improvements performed by the Company (Lessor), inseparable without damage to the leased out property and carried out at its own account and with the Lessor’s consent can be accounted at calculations relating to lease payment, or the Lessor has the right after the termination of the contract for compensation of cost of these improvements, if otherwise is provided by the lease contract.

    8. The fixed assets intended only for granting by the organization for a payment in temporary possession and use or in temporary use for the purpose of receiving income, are reflected in accounting and accounting statements as profitable investments in material valuables.

    9. In accordance with the par. 8 of “Instructions on recording of transactions under lease contact in accounting” tha Company records value of received leased property (if in accodance with the agreement of the parties the leased property is accounted at the Lessor’s balance) on off-balance account 001 «Leased fixed assets». The property is recorded on the account according to the valuation specified in the contract for acquisition of an leased item by a lessor net of VAT.

    10. Land plots received by the Company in lease are accounted according to cadastral value (in compliance with the list of transfer of leased land plots, submitted and signed purchase contract).




        • Accounting of equipment requiring assembly




    1. The equipment for installation is the equipment put into operation only after assembly of its parts and attachment to the foundation or support, to a floor, intermediate floors and other supporting structures of buildings and constructions as well as sets of spare parts of such equipment. This equipment includes control and measuring instruments or other devices intended for assembly in the structure of the assembled equipment..

    2. The equipment for installation is accepted to accounting on account 07 under the actual prime cost of purchase, which is formed from the cost under the prices of purchase and expenses on purchase and delivery of this equipment to the warehouse of the Company.

    3. Cost of equipment for installation used for replacement of power grid facilities at capital and routine repairs is included in expenses on capital and routine repairs.

    4. Cost of equipment for installation (counters) used for services to population is included in expenses on ordinary activities.




        • Intangible assets and their depreciation




    1. Intangible assets are non-monetary items belonging to the Company, which do not have physical structure, irrespective of their cost, intended for effective use in production, rendering services or for management needs within the term at least 12 months and capable to bring economic gains in the future.

    2. The Company does not recognize the items, concerning which at their acceptance to the accounting (during certification) the decision on alienation in favor of other persons is taken (resale, exchange etc.) as intangible assets. In this case, the item is qualified by the Company as the goods.

    3. Items of intangible assets includes those created or purchased on the basis of corresponding contracts:

    1. exclusive rights of the patentee on inventions, industrial patterns, useful models;

    2. exclusive rights of an owner to the Certificate trademark, service marks, location of origin of the goods;

    3. exclusive copyrights to the computer programs, databases;

    4. goodwill.

    1. Item of the accounting of intangible assets is recognized to be a collection of rights arising from one patent, certificate, agreement on cession of rights. The main feature, basing on which the item is identified from another, is its performing of independent function in production, performance of works or rendering services or use for management needs of the Company.

    2. Intangible assets are accepted to accounting at the initial cost determined depending on the reason of their receipt (acquisition, formation independently, receipt as the contribution in the authorized capital etc.).

    3. Cost of intangible assets, basing on which they are accepted to accounting, is not subject to change.

    4. Actual (initial) cost of intangible asset at which it is accepted to the accounting is not subject to change, except for the cases provided by the Law of the Russian Federation.

    5. Change of actual (initial) cost of intangible asset at which it is accepted to the accounting is admitted in cases of revaluation and devaluation of intangible assets.

    6. The Company may devaluate groups of homogeneous intangible assets at the current market value determined exclusively according to the active market data of specified intangible assets at most once per year (for the beginning of the reporting year).

    7. When taking decision on revaluation of intangible assets included in homogeneous group, it is necessary to take in consideration that these assets should be valuated regularly in future.

    8. Revaluation of intangible assets is performed by means of recalculation of theiri residual cost.

    9. Useful life of intangible asset is checked by organization for necessity of its itemization annually. In case of significant change of the period duration within which the organization supposes to use the asset, its useful life is subject to itemization. Adjustments occurred in this connection are recorded in the accounting and reporting for the beginning of the reporting year as change in estimation values.

    10. In relation to intangible asset with indefinite useful life the organization should annually consider avaliability of factors proving impossibility to determine useful life of this asset reliably. In case of termination of these factors the organization defines useful life of this intangible asset and way of its depreciation. Adjustments occurred in this connection are recorded in the accounting and reporting for the beginning of the reporting year as change in estimation values.

    11. Goodwill is accepted to accounting in the amount of the difference between actual purchase price of the acquired company (or its part) as property complex as a whole and cost of all (or corresponding part) of its assets and liabilities on the balance sheet.

    12. The negative goodwill is related in full to financial results of the organization as miscellaneous income.

    13. The positive goodwill is considered as the extra charge to the price paid by the buyer pending of the future economic gains. It is considered as a separate inventory item.

    14. The amount of depreciation charges on intangible assets is determined under the standards calculated basing on their initial cost and useful life (linear method).

    15. Useful life of intangible assets is determined by a commission of experts and approved by the Director of the Company (or the authorized person) at acceptance of the item to accounting basing on the following provisions:

    1. on the rights acquired on the basis of patents, certificates and other similar security documents containing validity, or validity fixed legislatively – basing on the term fixed in such document;

    2. on the rights acquired on the basis of author's contracts, contracts on cession and other similar contracts containing definite terms, for which intangible assets are acquired – basing on the terms specified in such contracts;

    3. on other items of intangible assets – basing on an expected term of use of an item, within which the Company can obtain economic gains from the use of the given assets;

    4. depreciation is not accrued on intangible assets with indefinite useful life.

    5. monthly amount of depreciation charges on intangible asset is determined by linear method;

    6. useful life of goodwill and organisational expenses is determined with regard to 20 years (but no more than the term of property complex activity, to which the given asset relates).

    1. Accrual of depreciation is effected monthly on the special account "Depreciation of intangible assets" (except for goodwill which cost is repaid by reduction of the residual under the account of accounting of intangible assets).

    2. Accrual of depreciation charges is not suspended, except for cases of dead storage of the property complex, to which the given asset relates, as a whole.

    3. Use of items of intangible assets for the purposes of production, rendering services or for management needs of the Company ceases in connection with:

    1. expiration of the term fixed in patents, certificates or other analogous protection documents;

    2. expiration of the term fixed in the relevant contracts;

    3. impossibility of useful life of the item prior to the expiration of the foregoing terms, if there is assurance that in the future this item will not be used in production, at rendering services or for management needs of the Company;

    4. cession of the exclusive right and its transfer in accordance with the procedure established by regulatory acts.

    1. In case of retirement of item of intangible assets, its cost is subject to write-off within the corresponding accounting period. In this case retirement of intangible assets is reflected at the residual cost according to a similar procedure established for the fixed assets.

    2. Intangible assets received for use are recorded by a user (licensee) on off-balance account in the estimate determined basing on the amount of remuneration specified in the contract.




      • Chosen methods of inventories accounting




        • Acknowledgement of assets as inventories and their valuation




    1. The following assets are recognized as inventories (hereinafter referred to as the Inventories):

    1. used as materials etc. at rendering services on transmission and transit of electric power, performance of works (production intended for sale), including the special tool, special devices, special equipment, electric counters, overalls

    2. intended for sale - the goods;

    3. used for management needs of the Company.

    1. Unit of the Inventories accounting is the nomenclature number or homogeneous group (depending on a kind of inventories).

    2. The Inventories for the purposes of accounting are estimated depending on the reason of receipt: acquisition for payment, production independently, non-payable receipt etc.

    3. The actual prime cost of the materials acquired for payment is the amount of actual expenses of the Company for acquisition, except for value added tax and other indemnifiable taxes.

    4. The actual prime cost of the materials acquired for payment, includes:

    1. cost of materials at contractual prices;

    2. transportation and procurement costs;

    3. expenses for bringing the materials up to the condition, in which they are fit for use for the purposes provided by the Company;

    4. other expenses connected directly with purchase of materials.

    1. The Inventories, which do not belong to the Company on the property right, transferred to it under contracts of commission, storage etc. are accounted off the balance in the estimate provided in the corresponding contracts and acceptance-transfer documents (acts, bills etc.).

    2. Governed by the requirement of rationality, the Company recognizes interests on loans and credits attracted for purchase of the Inventories as miscellaneous costs.

    3. The purchased overalls and special footwear, irrespective of cost and useful life, are accounted in the Company in the structure of circulating assets.

    4. Cost of overalls with useful life of more than 12 months is repaid by linear method basing on the useful life determined according to the foregoing standards.

    5. Cost of overalls, which useful life does not exceed 12 months under the norms of delivery is subject to lumpsum write-off during transfer (supply) to operation.

    6. The overalls, which useful life exceeds 12 months, are subject to write-off within the useful life starting with the month of its transfer to use.




        • Accounting of inventories acquisition




    1. Materials are a kind of inventories. The materials include raw material, the basic and auxiliary materials, purchased semi-finished items and completing products, fuel, container, spare parts, building and other materials as well as the special tool, special equipment, overalls.

    2. The expenses connected directly with process of procurement and delivery of materials are recognized as transportation and procurement costs. Transportation and procurement costs include:

    1. charges on loading of materials to vehicles and their transportation, subject to payment by the buyer over the price of these materials under the contract;

    2. payment for storage of materials in places of purchase, at railway stations, ports, quays;

    3. expenses for business trips on direct procurement of materials;

    4. other expenses.

    1. Materials are accepted to the accounting (are accounted) on the account 10 "Materials" at the actual prime cost of their acquisition (procurement) or the accounting prices. Accounting price is the price specified in the contract of a supplier (contractual).

    2. When it is impossible to include directly transportation and procurement costs in the actual cost of materials (connection to the contractual price of material), transportation and procurement costs are accepted to accounting on the account 15 "Procurement and acquisition of tangible assets".

    3. Unbilled deliveries are inventories supplied to the Company, which do not have settlement documents. Unbilled deliveries are entered in records and accounted in analytical and synthetic accounting at the accounting prices accepted in the Company - the price specified in the contract of the supplier (contractual).

    4. Expenses for the internal transfer of the Inventories (between subdivisions of the Company or its warehouses) are not included in cost of the acquired tangible assets, but related to the prime cost of services, works or products.



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    Useful life of items of fixed assets

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