Types and methods of valuation of fixed assets

Fixed assets (OS) - are tangible assets owned or owned by the entrepreneur that are suitable for use as part of the business, and the expected period of their use exceeds one year. In accordance with the law, fixed assets are subject to depreciation. However, before determining the depreciation method, the taxpayer must make an assessment. This is the basis for calculating depreciation.

Different types of OS estimates must be known in order to correctly maintain accounting records for these objects of study, as well as to calculate tax payments for them. Different aspects of the enterprise are associated with different types of assessments.

Fixed assets: essential characteristics

Fixed assets are material objects and resources equated to them, which at the same time meet the following conditions:

• their expected useful lives exceed one year;
• they are suitable for use for specific purposes, namely in production or in the provision of services (paragraph 4 of RAS 6/01);
• suggest future income;
• consumed during the period of use;
• no resale planned.

These include, in particular (Clause 3 of PBU 6/01):

• real estate, including land (even with an unlimited right to use), buildings and structures, as well as separate premises with the right to joint ownership of them;
• cars, devices, transport;
• machinery and equipment;
• objects commissioned for repair;
• capital and financial investments;
• working cattle, etc.

The term “completed and suitable for use” means that separately purchased objects, such as a computer, central unit, monitor, keyboard, are not considered fixed assets, but only their combination accepted for use as a finished object. Fixed components are also not considered as fixed assets that must be repaired before commissioning, since they, in turn, do not satisfy the condition of "suitability for use".

Valuation of fixed assets and methods of acquisition

Valuation of fixed assets - determination of their value. All categories are valued at the date of acquisition, manufacture and at the reporting date. Methods for assessing the value of fixed assets are regulated at the legislative level. Their application is established within the company depending on the type of activity and goals.

Valuation of funds is a very effective tool for managing the enterprise and its property. The calculation of the market value of the object in the current version allows you to optimize the company’s asset management policy, ensures its stability in the market, increases investment attractiveness, improves the processes of managing production and financial risks in the company. Thus, the evaluation process itself acts as the best indicator of an enterprise’s competitiveness in the market.

It has the most direct impact on the financial results of the company, its profitability, market stability. Therefore, the chances of the company in solving strategic management issues depend on the correctness and reliability of the data obtained during the assessment.

Legislatively stated that the assessment of the initial cost of fixed assets depends on the method of acquisition, which is presented in the table below:

Evaluation Rules

Fixed assets that were purchased are valued in accordance with the purchase price. The taxpayer must understand the purchase price as the value that can be determined by the formula:

purchase price = cost of goods + costs associated with the purchase accrued until the day the asset is transferred for use + customs and excise tax (in case of import) + non-deductible VAT

The purchase price should be understood as the amount due to the seller indicated in the purchase document, for example, in the invoice, the contract of sale. It is important to note that in the case of active VAT payers purchasing fixed assets on the basis of an invoice, the purchase price will, in principle, be a net amount. On the other hand, in the case of organizations exempted from VAT, this will be the gross amount.

However, when it comes to purchase costs, which are part of the purchase price and therefore increase the initial cost of the asset. These include, but are not limited to:

• fare;
• loading and unloading expenses;
• travel insurance expenses;
• assembly, installation costs;
• notarial, tax and other fees;
• commission.

The main types of assessments

The main methods for assessing fixed assets include:

• initial;
• recovery;
• residual.

The initial cost, which is the purchase price of the asset, increases by the costs of its improvement, consisting in reconstruction, expansion, modernization and determining the usefulness of this product after improvement, exceeding the consumer value, measured by the period of use, production capacity, quality of products obtained using the improved asset .

The initial cost as a type of valuation of fixed assets of the organization is reduced by writing off depreciation, which is made taking into account the loss of their value in connection with the use of time.

The initial cost and the accrued depreciation of fixed assets may be revalued based on individual reserves. The net book price determined as a result of the revaluation cannot exceed its fair value, the write-off of which in the foreseeable period of its further use is economically justified.

The difference in the net asset value resulting from the revaluation is transferred to the revaluation reserve and cannot be allocated to units.

An initial assessment among the methods of valuation and accounting of fixed assets can be made in accordance with one of five criteria:

1. The purchase price paid for the component, reduced by the amount of discounts, rebates, including VAT.
2. Purchase price increased by additional costs (for example, loading, transportation, assembly, installation, training, etc.).
3. Production costs - costs associated with the creation of fixed assets. Production costs include direct (surveying, research, remuneration for builders, etc.) and indirect costs (interest on loans taken for construction, management costs, responsible for the construction, etc.).
4. Market value is the price of the same or similar nature of an ingredient that could be bought at a specific price in a specific place and at a specific time.
5. Fair value is the price at which two well-informed parties can enter into a transaction on a market basis.

There is also the concept of a net selling price - the price at which you can get the same or similar object minus VAT and the average commercial margin. This criterion is not taken into account in the initial assessment of the OS.

The replacement cost in the methods of valuation and accounting of fixed assets means the cost of reproduction of fixed assets in the current environment, regardless of the time of their commissioning.

Under the residual value is understood that part of the price of the asset that is not transferred to the manufactured products in the form of deductions. This method of assessing the OS makes it possible to analyze the quality state of the funds, to calculate the expiration and wear coefficient. At a given cost, fixed asset objects can be reflected in accounting.

The use of natural indicators for assessment also takes place in the process of accounting for fixed assets. Such methods are used to determine the technical composition of fixed assets, in determining production capacity, in the formation of tasks and plans for improving the efficiency of asset use, etc. The results are obtained when conducting an inventory of fixed assets.

Among other options, the concepts of liquidation and book value are also used.

At liquidation value, an assessment process is carried out at the time when the liquidation process is going after bankruptcy. Moreover, this assessment can be used to recover the company's debts to creditors in the form of property.

A balance sheet estimate reflects OS assets in the balance sheet. This is a mixed technique, as part of the objects are reflected at replacement cost, and part at full original. Such an assessment may be complete or residual (after wear).

There is a type of valuation called market. It is understood as the value by which a given OS object is estimated taking into account wear and tear and the actual state. At a given price, an OS asset can be sold to another person in a market environment. In order to determine the cost by this method, the help of a specialist appraiser is used.

Among the main types of valuation of fixed assets can also distinguish the natural form. Natural indicators can be used by the company to justify development plans in this area of ​​accounting, to calculate forecast volumes. Information in this assessment form is reflected in the inventory card for the asset.

Initial value: concept

One of the methods for assessing funds is the initial price of the asset.

Fixed assets are included in the books according to the method of valuation of fixed assets of the enterprise at the initial (gross) value, corresponding to the following indicators:

• purchase price of acquired OS;
• production costs that arose within the company for the asset;
• the market value of fixed assets received in the form of a donation or in kind;
• gross value as a result of the transfer of fixed assets that are obtained through transformations (separation, merger);
• assembly costs and other necessary actions in order to make this tool suitable for operation.

The initial cost of the OS used is increased by the amount:

• The costs of its improvement (reconstruction, expansion, renewal or modernization). They lead to the fact that the useful value of the product after its completion exceeds its consumer value at the time of acceptance for use, which is manifested, inter alia, in the following: extension of the term of use, increase in production capacity, improvement of product quality using improved fixed assets, cost reduction its operation, increasing the area or comfort of buildings, etc.
• Revaluation of fixed assets, which is based on individual provisions. Both historical cost and current depreciation are remeasured. The effect of revaluation is recognized in the revaluation reserve.

Actual acquisition costs of this asset may be paid to the following counterparties:

• to suppliers;
• delivery carriers;
• developers;
• to contractors;
• consulting firms for services;
• intermediaries;
• persons for installation and commissioning of the OS object;
• to the state treasury in the form of taxes and duties.

The initial costs do not include the following expenses:

• on assets contributed as a contribution to the authorized capital;
• value of donated or non-repayable assets;
• cost of OS assets received by barter;
• capital investments in increasing land fertility.

Depreciation and its role in valuation

Depreciation deductions are made by systematic planned distribution of its initial cost for a certain depreciation period. Depreciation begins no earlier than the asset is put into operation and its completion occurs no later than the time the value is written off or redeemed.

It is assumed that the periods and associated depreciation rates used by the unit of fixed asset or intangible asset correspond to the periods and rates established by the applicable provisions of the law.

Fixed assets are depreciated monthly in accordance with the depreciation methods: linear, in proportion to the volume of goods, by the sum of all the numbers of years of the useful life, reduced balance.

The linear depreciation method is as follows. Annually, the value of the asset is written off to the value of the goods. The formula for the calculations is as follows:

A = Na * F / 100,

where f is the value of the asset (initial), thousand rubles;

On - depreciation rate,%.

A method using a reduced residue involves the use of the formula:

A = Oc * On / 100,

where OS is the value of the object at its residual value, thousand rubles;

On - depreciation rate,%.

When the method according to the cumulative years of useful use the formula:

A = PS * (CP / SL),

where PS is the cost of the OS at the initial value, thousand rubles;

SR - term until the end of operation, years;

SL is the total number of years of OS use.

When the method is proportional to the volume of goods (products) apply the formula:

A = PS * (Of / He),

where Of - the actual volume, thousand rubles;

It is the normative volume, thousand rubles.

On the day the asset is accepted, the period and depreciation rate are determined. The correctness of periods and depreciation rates is periodically checked by the enterprise and causes the corresponding adjustment of depreciation charges made in subsequent financial years.

The above write-offs in respect of fixed assets, the valuation of which has been updated on the basis of separate reserves, reduce the difference as a result of revaluation reflected in the revaluation reserve. Any balance from the write-off of the revaluation is included in other expenses.

Increase and decrease grades

The state and cost of their own operating systems undergo changes that increase and decrease their price.

The increase in the application of the valuation method of fixed assets occurs as a result of:

• independent purchase or production of fixed assets;
• receipt in the form of a donation;
• receipt in the form of a contribution;
• disclosure of surpluses of fixed assets;
• revaluations (which is only a valuable change);
• overvaluation - this depends both on the initial cost and on current depreciation, and the consequences of this revaluation are recorded in equity;
• Improvements - there is an increase in the initial cost according to reconstruction, expansion, modernization.

Possible cost reduction.

The application of the valuation method of fixed assets in case of reduction is due to the following reasons:

• OS liquidation in connection with their consumption, destruction;
• resale of fixed assets;
• donation transfers;
• transfers in the form of contributions in kind;
• shortages;
• write-off of depreciation.

Depreciation is the process of depreciation as a result of physical and economic depreciation and the gradual transfer of this value to products manufactured using it. The write-off is not subject, for example, to land where minerals are not used using an open method.

There are times when constant depreciation occurs. It appears when there is a high probability that the component controlled by the enterprise will not lead to the expected economic benefits in the future. This may occur, for example, as a result of the appointment of an object for liquidation or the occurrence of adverse changes associated with the use of this measure. The ongoing depreciation of property, plant and equipment is included in other operating expenses.

Grade Indicators

Among the indicators for assessing fixed assets can be identified:

• The indicator of physical depreciation shows the degree of deterioration of the fund during its use, that is, it indicates how much of the value of the asset has already been reimbursed to the owner in the form of depreciation. Formula for calculating the assessment of the status of funds:

K = C / OSp,

where C is the total depreciation value, thousand rubles;

OSp - the initial price of the object OS, thousand rubles

• The expiration indicator shows what is the proportion of the unworn part of the asset, that is, what part of the value of the asset has not yet been recovered in the form of depreciation. The coefficient is the opposite of the first indicator in assessing the OS. The calculation is made according to the formula:

K year = 1 - K.

Accounting Basics

Organization of accounting and valuation of fixed assets is carried out on account 01 “Fixed assets”. This account records all operations on funds received through account 08 "Investments in non-current assets". This account can be called intermediate between 01 and 60 "Settlement with suppliers". When the object is taken into account, all costs are written off to Dt account 08, and then from the credit of this account go to debit 01 of the account. From this moment, the introduction of the OS facility into operation is considered. The process of disposal and write-off occurs from account 01.

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Profitability ratio is the ratio of profit per unit value of an asset. The calculation is carried out according to the formula:

P = PE / OS,

where state of emergency - net profit, thousand rubles

These indicators for assessing the effectiveness of fixed assets can be calculated in physical units (even mixed).

The analysis usually includes not all fixed assets, but production assets, including machinery and equipment.

These methods for assessing the efficiency of use of fixed assets reflect many factors that affect the profitability or productivity of fixed assets.

There are extensive and intense factors. Extensive factors can lead to the fact that these coefficients become unreliable for assessment - they reduce the reliability of these two indicators.

The optimal use of the OS reduces unnecessary investment costs and too frequent purchases of new equipment. The expansion of production and cost reduction affect the increase in profits received by the enterprise. An increase in the indicator can be used for various purposes, for example, for modernization, raising wages, purchasing new equipment, and acquiring more raw materials. Therefore, the mechanism that operates on the basis of feedback is a better use and application of methods for assessing the effectiveness of the use of fixed assets.

Revaluation Basics

The types of valuation and methods of revaluation of fixed assets in the company are closely related. Consider the essence of the concept of revaluation.

The provisions of the law and other legal acts require the updating of the assessment of the OS. Revaluation of fixed assets associated with the following characteristics:

• decrease in their cost;
• increase in their value on the basis of individual regulatory acts.

Permanent depreciation occurs when it is highly probable that the asset will not bring significant or general projected economic benefits in the future.

The reason for the constant depreciation calculated by the valuation methods of fixed assets may be, for example:

• change in production technology;
• liquidation;
• withdrawal from use.

The revaluation process occurs using mathematical recalculation:

• initial or current value;
• depreciation amounts.

In a situation where, after revaluation, the value of the asset has risen, it is revalued, which is included in additional capital. Revaluation is credited to the financial result as part of other income.

The markdown is recognized as other expenses in the results and reduces additional paid-in capital.

Conclusion

Thus, under the assessment of OS objects, we understand the methodology for accounting for means of labor, which have a natural form and are subject to mandatory use in the production process. The transfer of part of the value of such objects to the cost of the final product refers to the concept of depreciation. All the rules and methods for assessing fixed assets of an enterprise can be regulated using PBU 6/01.

The assessment of fixed assets is necessary in a situation where it is necessary to take into account the tangible assets of the company, which are used in kind.

When assessing the objects of fixed assets, two types must be taken into account: in-kind and cash. In this case, the use of the natural form gives a qualitative characteristic of the asset, and the monetary form is used in determining tax liabilities. Therefore, the calculation of various types of OS value is a very important stage.

Assessing the state of fixed assets allows the company to determine the effectiveness of their application and develop a plan for updating and modernizing OS facilities.