We gave the concept of assets and cited them. They indicated that, depending on the period of circulation, assets are divided into (current, current) and long-term (non-current). We will talk about long-term assets on the balance sheet in our material.

What applies to long-term assets

Long-term assets are assets whose circulation period exceeds 12 months after the reporting date (clause 19 of PBU 4/99).

In the form of a balance sheet, long-term assets are reflected on the following lines (Order of the Ministry of Finance dated July 2, 2010 No. 66n):

The cost of the above property corresponds to the balance of Section I “Non-current assets” of the balance sheet, which is reflected in line 1100 “Total for Section I”.

At the same time, long-term receivables, also related to long-term assets, are reflected in section II “Current assets” of the balance sheet.

Therefore, to determine the total value of long-term assets (A D), it is necessary to add to the balance in Section I of the balance sheet the long-term receivables reflected in Section II of the balance sheet and allocated there separately as accounts receivable:

where VOA is the amount of non-current assets reflected on line 1100 of the balance sheet;

DZ D - long-term accounts receivable.

Definition 1

Other long-term assets are the funds of the enterprise, which represent profitable investments in long-term financial investments, tangible assets, equipment for installation and building materials, investments in deferred tax assets, long-term assets.

Note 1

Other long-term assets are not reflected in non-current assets.

Other long-term assets on the balance sheet

The following subaccounts are maintained in the accounting account:

• library collections (the accounting unit is a copy - each individual unit of a book; the form of general accounting is a book containing information about receipts and departures from the collection);
• low-value non-current tangible assets (life, items whose useful life is more than a year, including special tools, devices, replacement equipment, special clothing, etc.);
• temporary or non-title structures (small auxiliary objects that are used for construction needs and are not included in titles. Their cost is repaid by accruing depreciation);
• natural resources (when extracted they turn into material reserves);
• inventory packaging (not transferred to consumers, but remains on the balance sheet of the enterprise with a useful life of more than one year);
• rental items (objects transferred to citizens for urgent paid use in order to be used for household non-productive needs)
• other types of non-current tangible assets (the cost of all completed capital investments in operating lease objects - modification, modernization, additional equipment, completion, reconstruction, etc.).

Note 2

Quite often, managers and accountants tend to confuse an intangible asset with a tangible one, namely the right to an object of intellectual property and a tangible medium. For example, the right to use a computer program (an intangible asset) and the disk with this program (a tangible asset) are not identical. The book value of intangible assets should be considered the residual value, as with fixed assets.

Long-term financial investments

Long-term financial investments are financial investments for a period of more than one year, as well as all types of investments that cannot be realized at any time. These investments cannot be qualified as current.

The cost of financial investments includes:

• fees;
• duty;
• commissions;
• taxes that are not reimbursed to the company;
• purchase price;
• bank charges;
• other expenses associated with the acquisition of investments.

Deferred tax assets

Deferred tax assets are the cash amount of income taxes that are subject to reimbursement due to the difference between the tax and accounting valuation bases.

Such assets appear when the profit tax determined at the enterprise is less than the profit tax determined under current legislation.

In some cases, the profit reflected in accounting does not coincide with taxable profit. These indicators can show both smaller and larger profits. As a result of applying different tax and accounting procedures for the same business transactions, temporary or permanent differences arise. The latter are divided into taxable and deductible differences. Deductible temporary differences often result in deferred tax assets.

They appear due to the use of various methods:

• recognition of management and commercial expenses in tax and accounting;
• depreciation calculations in tax and accounting;
• accounting for losses from the sale of fixed assets (in accounting they reflect it at a time, in tax accounting they devote a certain period of time to this entry);
• accounting for expenses, if in tax accounting the cash method is used when calculating them, then in accounting the accrual method is used.

Deferred tax liabilities and assets are reflected in the balance sheet as separate items of long-term liabilities and non-current assets.

The accounting account records the amount of income taxes that are subject to reimbursement in subsequent reporting periods due to the transfer of tax losses that are not used to reduce income taxes in the reporting period, as well as the temporary difference between the carrying amount of liabilities or assets, as well as the assessment of these liabilities or assets applied for tax purposes.

Long-term liabilities

Definition 2

Long-term liabilities are the obligations of a company that are not current, that is, they are repaid over a specified period (more than 12 months), after drawing up the balance sheet or more than one operating period (when the duration of the operating period is more than 12 months).

Long-term liabilities of an enterprise include long-term financial obligations, attractions and obligations of borrowed funds, except for bank loans on which interest is charged, long-term bank loans, and also deferred tax liabilities (the amount of income taxes that are payable in future periods with a temporary difference between tax and accounting valuation bases), and other long-term liabilities.

Initial valuation of intangible assets and fixed assets

The principles of the initial cost of natural resources are similar to measuring the price of other long-term assets, i.e. This includes the purchase price and other costs associated with the purchase of natural resources. Discovering natural resources is often costly. The moment of receiving benefits and incurring costs from extracted resources is divided, in some cases, into very large intervals. Therefore, for example, when calculating the cost level of a mineral deposit, you need to take into account the following components:

• cost of acquiring the breed;
• development cost;
• exploration expenses;
• expenses for restoration of the area.

The preliminary valuation of intangible assets and fixed assets will depend entirely on the method of purchasing the specific object in which they are included.

• Cash (method of acquisition). Acquisition losses (initial estimate);
• Through bank loans (purchase method). Losses on acquisitions, without including the cost of paying interest on the loan (initial estimate);
• Received for free (purchase method). Value on date of receipt (initial estimate);
• Created on your own (method of acquisition). And the initial cost will consist of the amount of overhead and direct costs that are associated with the creation of the asset (initial valuation);
• Crediting from created products, goods, etc., intended for sale (purchase method). The cost of the asset to be sold (initial valuation);
• Exchange for similar assets (acquisition method). The final cost of the transferred object. Even if it exceeds the fair value, then the initial cost is accepted as the fair price of the transferred object and already including the difference, also taking into account cash expenses of the reporting period;
• Exchange for dissimilar assets (method of acquisition). The fair value of the item given up adjusted by any cash or cash equivalents that were received or given at the time of exchange (the original valuation).

Other current assets on the balance sheet areeconomic resources of the company that are not subject to reflection in the main lines of the report of the 2nd section. What items of income and investments are usually classified as other current assets, as well as data on which accounting accounts form this indicator, will be discussed further.

The concept of other current assets

Current assets represent the organization's economic assets consumed during the year or production cycle. During the commercial activities of the enterprise, their value is completely transferred to the manufactured products or funds received.

Information about current assets is recorded in the 2nd section of the balance sheet, divided into main groups. Amounts that do not fit this group are recorded separately in line 1260 as other current assets.

IMPORTANT! According to para. 3 clause 11 PBU 4/99 information on individual types of assets can be reflected in a total amount with explanations to the balance sheet if the amount of each indicator is not significant for assessing the results of financial activities.

To detail the indicators of other current assets, a separate line 12605 “Deferred expenses” is provided in the balance sheet.

You can learn more about balance sheet items, their meaning and content in the article.

What do other current assets include?

Balance sheet line 1260 may include assets such as:

• Proceeds from the sale of property for which title has not yet been registered to the buyer. In this case, you can enter a decoding line in the balance sheet or issue an explanatory note.
• Accrued VAT on revenue that temporarily cannot be taken into account (the conditions for recognizing revenue are described in PBU 9/99).
• The cost of damaged material assets and shortages, the source of compensation for which is temporarily not determined.
• VAT on advances and excise taxes, the reimbursement of which is planned in the near future.
• The amount accrued but not billed for payment under a construction contract (for more details, see PBU 2/2008).
• The cost of shares (shares) purchased for their further resale.

What does the increase in the indicator in line 1260 indicate?

Analysis of asset turnover allows us to determine the financial dynamics of the enterprise's development. An increase indicates job stability and rational use of funds. In this case, it is necessary to take into account complete information about the composition of assets. It is inappropriate to use only one value of other current assets for analysis due to its insignificance.

Results

Other current assets are accounted for in line code 1260 of the balance sheet and include transactions that do not fall under the distribution in the basic information of the 2nd section. Analysis of asset turnover allows us to determine the financial dynamics of the enterprise's development.

To ensure the activities of each enterprise, along with the presence of current assets, the presence of long-term assets, which include fixed assets, other tangible and intangible assets that have been used by the enterprise for a long time, is important. In some countries they are also called irreversible, non-negotiable, permanent.

Assets are classified as long-term if they meet the following criteria:

acquired for the purpose of use in the economic activities of the enterprise;

not intended for sale;

have a useful life of more than one year.

The main purpose of acquiring long-term assets is their use in the process of producing products, providing services or selling goods, and not for resale. Another purpose of long-term assets can also be rental, use for administrative needs and maintaining fixed assets in working condition.

Long-term assets include: land, fixed assets, natural resources, intangible assets, and long-term financial investments, the characteristics of which will be discussed in the following topics.

When classifying assets as long-term in foreign countries, cost restrictions, in most cases, are not established. Enterprises have the opportunity, depending on the size and type of activity, to independently decide to capitalize such expenses or write them off as current. The specifics of the enterprise’s activities also determine the different characteristics of long-term assets and their division according to various criteria (Fig. 6.1). Such classification criteria for this type of asset are:

presence of material form;

depreciation (wear and tear);

ability to reproduce.

Based on the presence of material form, long-term assets are divided into: tangible and intangible.

Material assets have physical substance, that is, they have a material form (land, fixed assets, natural resources). Therefore, in some countries they are also called tangible. Material assets in the balance sheets of enterprises in foreign countries, in most cases, are not reflected in one general item - “Fixed assets” under several items with a detailed disclosure of their structure (for example: land; buildings and structures; equipment; office equipment; natural resources). The level of detail is determined by the enterprise independently.

Intangible assets do not have a physical (material) form, which is why they are also called intangible. These include rights to use property and intellectual property: B licenses, trademarks, patents, computer software, copyrights and the like. In the financial statements (balance sheet), intangible assets are reflected mainly without division into groups, but sometimes trademarks and goodwill are separately identified.

In relation to the calculation of depreciation (wear and tear), long-term assets are divided into such that:

depreciated (fixed assets, natural resources, intangible assets);

not depreciated (earth).

Depreciation of long-lived assets involves distributing the cost of these assets over their useful life in order to determine the actual financial result in each reporting period.

ability to reproduce long-term assets are classified into:

reproducible (land, fixed assets, intangible assets);

non-renewable (natural resources).

Rice. 6.1. V

Reproduction is understood as the process of returning an asset to the possibility of using it for its intended purpose by making appropriate expenses.

Valuation of long-term assets upon receipt of the enterprise, in accordance with generally accepted accounting principles, is made at cost, which includes the purchase price minus discounts received and the costs of bringing them to the state of use for their intended purpose (brokerage costs, customs duties, sales tax, expenses for transportation, payment for installers, etc.). At the same time, expenses that form the initial cost of long-term assets must be justified and necessary.

Features of the assessment of certain types of long-term assets are as follows.

The initial cost of land includes: purchase price; commissions paid to real estate agents, taxes upon purchase; additional payment for legal services; costs of insuring land title; expenses for draining, improving and cleaning land, which has an unlimited useful life. If there are old unsuitable buildings on the land plot that the buyer does not need, then despite this, the price of the land also includes their cost and all costs of liquidating these buildings. That is, the initial cost of land includes all expenses associated with the acquisition and bringing it to a state suitable for use and they are reflected in the debit of the “Land” account. Costs for improving land that has a limited useful life, such as costs for sidewalks, fences, fences, parking lots, etc.) are reflected in the Land Improvement account and are amortized over its useful life. The fair value of land, as a rule, is its market value, which is determined during an expert assessment by professional appraisers.

The initial valuation of fixed assets and intangible assets will depend on the method of acquiring a particular object (Table 6.1).

It should be noted that the application of the principle of conservatism implies that the book value of fixed assets manufactured or built for one’s own needs should not exceed their market value, and if it exceeds, such a difference is reflected as losses of the enterprise, since it is believed that it will not bring economic benefits in the future. future. If the costs of manufacturing or construction in-house are less than the market value, then the actual costs incurred are considered the book value. The effect from the use of such fixed assets will be obtained later as a result of a decrease in depreciation costs, and as a result, an increase in income. If credit resources were used to create fixed assets on our own, then interest on them is included in the book value of such assets as part of overhead expenses.

The general principles for the initial valuation of natural resources are similar to those for measuring the value of other long-lived assets, i.e.

Table 6.1. Initial valuation of fixed assets and intangible assets

it includes the purchase price and other costs associated with acquiring natural resources. However, identifying natural resources requires significant costs. In addition, the moment of incurring costs and receiving benefits from extracted resources is separated, in most cases, by long time intervals. Therefore, for example, when calculating the cost of a mineral deposit, four components are taken into account: the cost of acquiring the deposit; exploration expenses; development cost; expenses for restoration of the area.

In the case of the simultaneous purchase of a group of long-term assets, when payment for them is made in one amount (“lump sum”) without dividing the cost by object, there is a need to distribute such value according to the types of assets that were purchased. This is especially important for long-term assets that are subject to depreciation and for which depreciation is not charged. A reasonable distribution of the total cost of the assets is carried out in proportion to the current market value of each asset on the date of acquisition, taking into account the fact that their value will change in proportion to the sale price.

To determine the fair market value of long-lived assets, a business may use an independent appraisal, insurance appraisal, or government tax appraisal for property taxes.

For example, an enterprise purchased from a company undergoing liquidation a plot of land with a building located on it for $250,000. Since depreciation is charged on buildings, but not on land, it is very important to rationally distribute the value between these two types of long-term assets. To distribute the cost, an assessment carried out by independent experts was used (Table 6.2).

Table 6.2. V Distribution of cost between land and building according to expert assessment

Distributing the value of long-lived assets over their useful life is the main accounting problem for this category of assets.

In foreign practice, long-term assets are defined as a flow of services that will be received by the owner over a certain period (for example, the purchase of a truck is considered as payment for transport services many years in advance). Therefore, the amount of expenses for the acquisition of a long-term asset, according to the consistency principle, should not be recognized in the current accounting period, but should be treated as an advance expense and systematically and rationally distributed between accounting periods in which the use of these assets will lead to the receipt of income. The cost of long-lived assets (other than land) is allocated to expenses over a specified period of time to calculate the real income in each accounting period and at the same time reflect the decrease in the carrying amount of the asset (accumulated depreciation (depreciation)). Expenses appear on the income statement, and accumulated depreciation (depreciation) appears on the balance sheet.

Thus, depreciation in foreign countries is viewed as allocating the cost of a long-lived asset over its useful life to match costs incurred with revenue received, rather than as a transfer of cost to the finished product. At the same time, to determine the process of systematic and rational distribution of the initial cost and reflect the decrease in the balance sheet valuation of long-term assets, three different periods are used (typical for countries of the British-American accounting model):

depreciation is the process of systematically distributing the value of long-term material assets (except natural resources) over the period of their use to generate income;

expenditure - as a process of systematic distribution of the value of natural resources during periods of their use as a source of income;

depreciation - as the process of systematically allocating the value of intangible assets over the periods in which they contributed to the generation of income.

Accountants use the term "depreciation" to reflect a permanent decrease in the value of long-lived assets, although it does not necessarily characterize the decline in the market value of these assets over a certain period of time. IAS 16 "Fixed Assets" defines the systematic distribution of the cost of an item of fixed assets over its useful life as depreciation. Therefore, in the future we will use both the term “depreciation” and “amortization” of long-term assets.

The distribution of the value of a long-term asset over its useful life depends on a number of indicators, the main of which are:

initial cost includes the acquisition price minus any discounts received and the costs of bringing the asset to its intended use;

Salvage value is the amount of funds expected to be received in the event of liquidation or subsequent possible sale of an asset, minus the costs of transfer, dismantling or sale of that asset (the cost of scrap and other waste from disposal that a potential buyer is willing to pay). Certain long-lived assets (for example, natural resources) may not have a salvage value and determination is not mandatory (for example, in France the expected salvage value of fixed assets is neglected). This is due to the fact that the liquidation value may be insignificant or impossible to estimate;

depreciation value is the difference between the original cost (or other cost that replaces it on the balance sheet) and the liquidation value of the asset;

the predicted useful life is determined in the number of years of possible operation of the object. When determining the projected useful life, the accumulated experience of working with similar assets, the current state of the facility, repair issues, expected physical and moral wear and tear (the influence of modern trends in technology), legal and other restrictions on the use of the facility (for example, legislative definition of deadlines for safe operation) are taken into account ) and the like. This period may be shorter than the standard service life determined by the technical documentation, since the useful life of an object is determined based on its usefulness for a particular enterprise.

For long-term assets for which production indicators can be established with sufficient accuracy, their predicted value is also determined in the number of units of production (for production equipment), mileage (for vehicles), etc., with an appropriate breakdown by year.

Current assets are cash or cash equivalents that are expected to be used within twelve months after the end of the reporting period. Long-term assets - all other assets.

Comment

In the balance sheet, assets must be divided into short-term and long-term (clause 60 of the International Financial Reporting Standard (IAS) 1 “Presentation of Financial Statements”).

The term "Current assets" is explained in paragraphs 66-68 of International Accounting Standard (IAS) 1 "Presentation of Financial Statements":

66. An entity shall classify an asset as current if it meets any of the following criteria:

(a) it is intended to be sold or is intended for sale or consumption in the normal operating cycle of the enterprise;

(b) it is intended primarily for trading purposes;

(c) it is expected to be realized within twelve months after the end of the reporting period; or

(d) the asset is cash or cash equivalents (as defined in IAS 7) unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the end of the reporting period.

An entity must classify all other assets as non-current.

67. In this Standard, the term “non-current” is used to refer to tangible, intangible and financial assets of a long-term nature. The standard does not prohibit the use of alternative symbols, provided that their meaning is clear.

68. The operating cycle of an enterprise is the period of time from the time assets are acquired for processing until they are exchanged for cash or cash equivalents. If it is not possible to clearly define the normal operating cycle of an enterprise, it is assumed that its duration is twelve months. Current assets include assets (such as inventories and accounts receivable) that are sold, consumed or disposed of in the normal operating cycle, even if they are not expected to be sold within twelve months after the end of the reporting period. Current assets also include assets held primarily for trading purposes (examples include financial assets that meet the definition of “held for trading” in accordance with IFRS 9) and the current component of long-term financial assets.