Financial investments- this is the placement of free funds either by purchasing securities or issuing loans or making contributions to authorized capital.
If we turn to international standards, namely IFRS 39, we will not encounter the concept of financial investments, because IFRS uses the term “financial instrument”. Financial instruments include both financial assets and financial liabilities of a company, i.e. is significantly broader than the concept of financial investments.
Distinguish long-term and short-term financial investments. Short-term assets are those whose circulation or repayment period does not exceed 12 months, while long-term are financial investments with a maturity of more than one year.
According to accounting rules, financial investments include:
- securities (state, municipal, other companies), including debt securities in which the date and cost of repayment are determined (bonds, bills);
- contributions to authorized (share) capitals, including subsidiaries and dependent business companies;
- loans provided;
- deposits in credit institutions;
- contributions of a partner organization under a simple partnership agreement.
Regardless of which accounting account reflects assets that, in accordance with the requirements of PBU 19/02, are financial investments (including long-term financial investments), information about them should be shown in the balance sheet as part of financial investments (line 1150 “Financial investments" balance sheet).
The Ministry of Finance reminds that in annual accounting reports, financial investments must be reflected at market value.
The main tasks of analyzing long-term financial investments include:
- analysis of directions for long-term financial investments;
- analysis of composition and structure;
- analysis of funding sources;
- assessment of the effectiveness of long-term financial investments.
The source of information for the analysis of reporting until 2011 was Form No. 5 “Appendices to the Balance Sheet”, and from the 2011 report, the breakdown of long-term financial investments is reflected in the notes to the balance sheet and the profit and loss statement.
An approximate form of analysis of the volume, composition, structure and dynamics of long-term financial investments:
| No. | Index | At the beginning of the reporting period | At the end of the reporting period | Dynamics | |||
|---|---|---|---|---|---|---|---|
| Amount, rubles | Specific gravity, % | Amount, rubles | Specific gravity, % | Amount, rubles | Specific gravity, % | ||
| 1. | Contributions to the authorized (share) capitals of organizations - total, including: | ||||||
| 1.1. | Subsidiaries and dependent business companies | ||||||
| 2. | |||||||
| 3. | Securities of other companies - total, including: | ||||||
| 3.1. | |||||||
| 4. | Loans provided | ||||||
| 5. | Deposits | ||||||
| 6. | Others | ||||||
| 7. | Long-term financial investments, total (page 1+2+3+4+5+6), including: | 100% | 100% | 100% | |||
| 7.1. | Long-term financial investments with current market value - total, including: | ||||||
| 7.1.1. | Contributions to the authorized (share) capitals of organizations - total, including: | ||||||
| Subsidiaries and dependent business companies | |||||||
| 7.1.2 | State and municipal securities | ||||||
| 7.1.3. | Securities of other organizations - total, including: | ||||||
| Debt securities (bonds, bills) | |||||||
| 7.1.4 | Others | ||||||
| 8. | For long-term financial investments with a current market value, changes in value as a result of valuation adjustments | ||||||
| 9. | For long-term debt securities, the difference between the initial cost and the nominal value is attributed to the financial result of the reporting period | ||||||
Based on the results of the above analysis, conclusions can be drawn about the impact of changes in the value of each type on the deviation of the total amount of long-term financial investments. In addition, the table will clearly illustrate changes in the composition and structure of long-term financial investments that occurred in the analyzed period.
Significant attention is paid to indicators 8 and 9.
This is due to the fact that negative values of these indicators reflect the depreciation of the organization’s long-term investment portfolio, which is, of course, a negative phenomenon, and a change in them to a lesser extent characterizes a slowdown in the growth of the market value of the long-term investment portfolio and also cannot be assessed positively.
Literature:
- Ilysheva N.N., Krylov S.I. Analysis of financial statements: Textbook. M.: Finance and Statistics; INFRA-M, 2011
- Krylov S.I. Improving the methodology of analysis in the financial condition management system of a commercial organization: Monograph. Ekaterinburg: State Educational Institution of Higher Professional Education USTU-UPI, 2007
Making investment decisions is usually preceded by a detailed analysis of the financial market, thanks to which the optimal option is selected that ensures profitability and reliability of investments.
The concept of financial investments means investment in the assets of another enterprise, lending funds, opening deposits, purchasing government shares, etc.
According to current laws, investments for accounting purposes must include the following assets:
- accounts receivable;
- purchase of shares of the state or other institutions;
- deposits;
- purchase of bonds;
- loans to other enterprises;
- investment in someone else's capital.
In addition, partnership contributions of an enterprise under a pre-concluded agreement can also be classified as financial investments.
Structure of financial investments
There are a number of conditions that must be met in order for certain invested funds to be accepted into accounting. Among them:
Note! Each enterprise selects an accounting unit for capital investments independently to provide complete information about them. Depending on the nature of the investment or the order of its purchase, such a unit can be, for example, a batch, series, etc.
Every enterprise must maintain investment records to provide information about the investment units and the enterprises in which the funds were invested. This is very important, because it allows you to generate data by group.
According to the Civil Code (CC), shares are defined as movable property of an enterprise. They, as well as other property, must be assessed and reflected in accounting. When accepted for accounting, capital investments must be divided into two categories:
- those for which it is impossible to determine the current market value;
- those for which this can be done.
The second category includes quoted securities, shares and other investments, the price of which has documentary evidence. Typically, investments are accepted for accounting purposes at their original price.
Note! The initial cost of investments acquired from other enterprises is considered to be the amount of purchase costs excluding VAT and other refundable taxes (this does not include cases provided for by the relevant laws of the Russian Federation).
Based on this, the costs of acquiring financial investments can be considered:
- money paid according to the agreement with the seller;
- remuneration to the third party through which the assets were acquired;
- money for consultation or informational services;
- other costs directly related to the acquisition of investments.
This list does not include general business plan expenses if they are not directly related to the purchase of assets.
The costs of purchasing assets are determined in accordance with the amount difference that arises after payment in rubles for an amount in another currency (for example, in dollars), until the assets are taken into account as investment funds.
If the amount of expenses for investments is insignificant compared to what is paid under the contract signed with the seller, then in accounting such expenses are recognized as other expenses of the organizational plan.
The initial price of capital investments entered into the authorized capital of an enterprise will be their assessment by consent of the owners (founders), unless otherwise provided by the current law.
The initial price of shares received from third parties without payment is considered to be:
- the amount that can be received for the sale of shares at the time they appear in accounting;
- market price at the time of registration (value determined by the trade organizer).
The initial value of assets received under an agreement for non-monetary payment is considered to be the amount of investments that were transferred or will be transferred to the enterprise. The value of such assets in this case is determined by the value of similar ones from competing enterprises.
Note! If the price of assets cannot be determined, then investments received under a contract involving non-cash payment are calculated at the current purchase price of similar assets.
If at the conclusion of the transaction there is a simple partnership, then the value is determined in accordance with the concluded contract. Finally, if assets were purchased for foreign currency, then their value is recalculated in rubles according to the current exchange rate of the Central Bank.
If the shares do not belong to the enterprise, but are at its disposal, then they are also taken into account in accordance with the agreement. Their initial cost may change under the conditions provided for by law.
For the purpose of further assessment, all investments are conditionally divided into the following categories:
- those by which the current price is calculated;
- those by which it is not calculated.
It is worth noting that investments, with the help of which the value is nevertheless determined, are shown in accounting at the end of the reporting year at the current market value (the price is adjusted relative to the date of the previous reporting). Interestingly, this kind of adjustment can be performed quarterly or monthly.
Investments for which it is impossible to determine the cost are shown in accounting at the original price at the time of reporting.
As noted earlier, shares are considered the most important element of investment. In accordance with the Civil Code, the following types of shares are allowed on the financial market:
- options;
- bonds;
- housing certificates;
- bills;
- stock;
- certificates of deposit;
- bills of lading;
- passbooks;
- warehouse receipts.
Each of the listed securities must have details. If they are not there or they do not correspond to the truth, then the transaction that is made with their help is considered invalid.
| №№ | Purchase method | Initial estimate in accounting. accounting | Initial assessment in tax accounting |
|---|---|---|---|
| 1 | For a fee | Actual acquisition costs (clause 9 of PBU 19/02) | Actual acquisition costs (clause 2 of article 280 of the Tax Code of the Russian Federation) |
| 2 | Securities received as a contribution to the authorized capital | Monetary valuation agreed upon by the founders (participants) of the organization, unless otherwise provided by the Legislation of the Russian Federation (clause 12 of PBU 19/02) | The cost is determined according to the tax records of the transferring party. When depositing securities by individuals and foreign organizations, their value is recognized as documented expenses, but not higher than the market value of this property (property rights), confirmed by an independent appraiser (Article 277 of the Tax Code of the Russian Federation). |
| 3 | Securities received free of charge | Current market value at the date of acceptance for accounting (clause 13 of PBU 19/02) | Based on market prices determined taking into account the provisions of Art. 40 of the Tax Code of the Russian Federation, but not lower than the acquisition costs. Information on prices must be confirmed by documents or by conducting an independent assessment (clause 8 of Article 250 of the Tax Code of the Russian Federation). |
| 4 | Securities purchased under agreements providing for non-cash settlements | The initial cost of financial investments acquired under agreements providing for the fulfillment of obligations (payment) in non-monetary means is recognized as the value of assets transferred or to be transferred by the organization. The value of assets transferred or to be transferred by an organization is established based on the price at which, in comparable circumstances, the organization usually determines the value of similar assets. If it is impossible to establish the value of assets transferred or to be transferred by an organization under contracts providing for the fulfillment of obligations (payment) in non-monetary means, it is established based on the cost at which similar financial investments are acquired in comparable circumstances (clause 14 of PBU 19/02). | Actual costs of acquiring the transferred property |
The price of securities at the time of purchase should include:
But there is one exception. We are talking about cases when credit funds are used by an enterprise for prepayment. Here, receivables should be added to interest, but only before accepting funds for accounting. Investments also do not include general business expenses.
Shares purchased from other businesses are paid for in cash or assets. The shares themselves, in terms of the scope of rights granted to the owner, can be:
- ordinary (imply participation in shareholder meetings and receipt of dividends);
- preferred (management of a joint stock company and fixed amounts of dividends).
If we consider shares from the point of view of denoting a person, they can be:
- registered (contains the owner’s full name, registration);
- bearer (do not contain any information, the community knows nothing about the shareholders).
There are also valuations that stocks have. This:
- nominal price;
- balance price;
- market price.
In the first case, the share itself is designated, in the second – the amount of investment, in the third – the sale price of the securities.
Short-term financial investments - investments of an enterprise in various financial instruments for a period of up to one year. The main forms of short-term financial investments are: the purchase of short-term bonds, short-term savings certificates, bills, placing funds on a deposit account (up to one year), etc.
Short-term financial investments are a form of temporary use of an enterprise's free cash assets in order to protect them from inflation and generate income. Due to the high liquidity of short-term financial investments, they are equated to ready-made means of payment and serve as security for urgent financial obligations of the enterprise Fomicheva L.P. Preparation of financial statements for a commercial organization based on the results of the financial year. - M.: Prospekt, 2010. - P. 69..
Depending on the period for which financial investments were made, they are divided into:
- 1) long-term (when the established maturity period exceeds 1 year, or investments made with the intention of receiving income from them for more than 1 year); financial investment balance sheet
- 2) short-term (when the established repayment period does not exceed 1 year, or investments made without the intention of receiving income from them for more than 1 year).
To analyze the effectiveness of financial investments, the average level of profitability (U) is calculated:
where D is the amount of income received from financial investments (income most often includes dividends, interest, and increases in capitalized value);
C is the average annual amount of financial investments.
To assess the effectiveness of financial investments, the level of profitability is compared with the so-called alternative (guaranteed) income, which is usually taken to be the refinancing rate. The effectiveness of financial investments is also assessed by comparing their profitability with the return on capital investments in the analyzed enterprise.
Based on factor analysis, the influence of the structure of financial investments and the level of profitability of certain types of financial investments on the average level of profitability of financial investments is revealed. When analyzing the effectiveness of long-term and short-term financial investments, you can use general techniques of investment analysis and special techniques for assessing the effectiveness of certain types of financial investments (stocks, bonds, bills, etc.) Economic analysis: Textbook for universities / Ed. L.T. Gilyarovskaya. - M.: UNITY-DANA, 2010. - P. 187..
In the financial statements, at least the following information is subject to disclosure, taking into account the materiality requirement:
- 1) on methods for assessing financial investments upon their disposal by groups (types);
- 2) on the consequences of changes in the methods of assessing financial investments upon their disposal;
- 3) the value of financial investments for which the current market value can be determined, and financial investments for which the current market value cannot be determined;
- 4) the difference between the current market value as of the reporting date and the previous assessment of financial investments by which the current market value was determined;
- 5) for debt securities for which the current market value has not been determined - the difference between the initial cost and the nominal value during their circulation period;
- 6) the value and types of securities and other financial investments encumbered with collateral;
- 7) the cost and types of retired securities and other financial investments transferred to other organizations or persons (except for sale);
- 8) data on the reserve for impairment of financial investments, indicating: the type of financial investments, the amount of the reserve created in the reporting year, the amount of the reserve recognized as operating income of the reporting period; reserve amounts used in the reporting year;
- 9) for debt securities and loans provided - data on their valuation at discounted value, the amount of their discounted value, and the discounting methods used.
In the currently valid Form No. 5, the “Financial Investments” section has been significantly expanded. In particular, the list of financial investments has been expanded, which includes the following types:
- - contributions to the authorized capitals of other organizations (including subsidiaries and dependent business companies);
- - state and municipal securities;
- - securities of other organizations (including debt securities - bonds, bills);
- - loans provided;
- - deposits;
- - other financial investments.
The information in the Appendix to the Balance Sheet allows you to analyze financial investments in the following areas:
- 1. it is determined which financial investments - long-term or short-term - prevailed in the organization at the beginning and end of the reporting period;
- 2. the dynamics of financial investments are analyzed in terms of the total amount and in the context of their individual types;
- 3. The structure of long-term and short-term financial investments is assessed. At the same time, you should pay attention to where the organization actively invests its money - in equity, debt securities, provides loans to other organizations, makes deposits;
- 4. the deviation of the current market value of financial investments in securities from their balance sheet valuation is studied, if such information is presented in the Appendix to the Balance Sheet;
- 5. Using the data from the Profit and Loss Statement, you should evaluate the profitability of the organization’s financial investments. To do this, the amounts reflected in the lines of Form No. 2 “Interest receivable” and “Income from participation in other organizations” should be compared with the average annual cost of financial investments calculated according to Form No. 5.
The purpose of the analysis is to assess the feasibility of making financial investments.
Sources of information for the analysis are Form No. 1 “Balance Sheet”, Form No. 2 “Profit and Loss Statement”, Form No. 5 “Appendix to the Balance Sheet” (section “Financial Investments”), Explanatory Note.
The analysis is carried out in three stages. Each stage involves a comparison of indicators for the period under study and for the previous period.
First stage. Assessing the organization's capabilities to make financial investments. It is necessary to find out whether the organization has sufficient funds to make financial investments. To do this, an analysis of solvency, financial stability, and the amount of funds is carried out. The methods of this analysis are given in separate topics and sections of this manual.
Second phase. Calculating the return on financial investments and comparing it with the return on assets as a whole. Financial investments are appropriate if their profitability exceeds that of the assets as a whole.
The information contained in the reporting makes it possible to separately calculate the profitability of financial investments in the authorized capital of other organizations and the overall profitability of other financial investments.
The first indicator is the profitability of financial investments in the authorized capitals of other organizations
where is the average balance of contributions to the authorized (share) capitals of other organizations (long-term and short-term) (calculated using a simple average according to Form No. 5 “Appendix to the Balance Sheet”, section “Financial Investments”);
FD – income from participation in other organizations (Form No. 2 “Profit and Loss Statement”, corresponding line).
The second indicator is common for financial investments in state and municipal securities, debt securities of other organizations, loans provided, deposits, and others. Income from these financial investments is reflected in the “Interest receivable” line of Form No. 2 “Profit and Loss Statement”. The profitability of these financial investments will be determined by the formula
, (4.13)
where is the average balance of long-term and short-term financial investments, with the exception of investments in other organizations (calculated using a simple average according to the corresponding lines of Form No. 5 “Appendix to the Balance Sheet”, section “Financial Investments”);
PP – interest receivable (form No. 2 “Profit and Loss Statement”, corresponding line).
The average balance of financial investments will be calculated most accurately using the interim balance sheet.
For a more accurate conclusion about the feasibility of specific financial investments, relevant information is needed for each type. This information, if necessary, can be presented in the Explanatory Note.
The return on financial investments should be compared with the average return on assets as a whole
where is profit before tax (form No. 2 “Profit and Loss Statement”, corresponding line);
– average balance of all assets (average balance sheet) (calculated using a simple average according to Form No. 1 “Balance Sheet”, lines 300 or 700).
Third stage. The indicators of the share in the balance sheet and the growth rate of financial investments are determined. These indicators are assessed based on the previously made conclusion about the feasibility of financial investments. In this regard, the share indicators in the balance sheet and the growth rate should be calculated for the same groups of financial investments for which profitability was determined at the previous stage of the analysis.
Data presentation forms for analyzing financial investments using the example of Metallurgical Plant OJSC are given in Tables 4.8 and 4.9.
Table 4.8 – Calculation of profitability of financial investments and assets in general
enterprises for 2008
End of table 4.8
| Magnitude | ||
| Balance of long-term deposits in the authorized (share) capitals of other organizations at the end of the year, thousand rubles. | Form No. 5, section “Financial investments”, corresponding line, column 4 | – |
| Balance of short-term deposits in the authorized (share) capitals of other organizations at the beginning of the year, thousand rubles. | Form No. 5, section “Financial investments”, corresponding line, column 5 | – |
| Balance of short-term deposits in the authorized (share) capitals of other organizations at the end of the year, thousand rubles. | Form No. 5, section “Financial investments”, corresponding line, column 6 | – |
| Average balance of long-term and short-term financial investments in the authorized (share) capital of other organizations, thousand rubles. | – | |
| Income from participation in other organizations, thousand rubles. | Form No. 2, corresponding line, group 3 | |
| Return on investment in authorized (share) capital of other organizations, % | Formula (4.12) | 9,9 |
| Balance of other long-term financial investments at the beginning of the year, thousand rubles. | Sum of data on the corresponding lines of form No. 5, section “Financial investments”, gr. 3 | – |
| Balance of other long-term financial investments at the end of the year, thousand rubles. | Sum of data on the corresponding lines of form No. 5, section “Financial investments”, gr. 4 | – |
| Balance of other short-term financial investments at the beginning of the year, thousand rubles. | Sum of data according to lines form no. 5, section “Financial investments”, gr. 5 | – |
| Balance of other short-term financial investments at the end of the year, thousand rubles. | Sum of data on the corresponding lines of form No. 5, section “Financial investments”, gr. 6 | – |
| Average balance of other long-term and short-term financial investments, thousand rubles. | – | – |
| Interest receivable, thousand rubles. | – | |
| Return on other financial investments, % | Formula (4.13) | – |
| Balance sheet summary at the beginning of the year, thousand rubles. | Form No. 1, gr. 3, p. 300 or 700 | 509 696 |
| Balance sheet result at the end of the year, thousand rubles. | Form No. 1, gr. 4, p. 300 or 700 | 562 294 |
| Average balance sheet total, thousand rubles. | – | 535 995 |
| Profit before tax, thousand rubles. | Form No. 2, corresponding line, column 3 | 37 703 |
| Return on assets, % | Formula (4.14) |
Note. If we assume that during the year no contributions were made to the authorized (share) capital and income was received from investments available at the beginning of the year, then the profitability of these investments will be 5% ( 
).
Table 4.9 – Calculation of indicators of dynamics and share in the total balance of financial
enterprise investments for 2008
| Indicator, unit of measurement | Source of information or formula | Beginning of the year | The end of the year | Growth rate, % |
| 1. Amount of long-term financial investments – total, thousand rubles, including: | Form No. 1, page 140 | –78,0 | ||
| Form No. 5, section “Financial investments”, line “Total”, gr. 3 and 4 | ||||
| 1.1) long-term contributions to authorized capital | Form No. 5, section “Financial investments”, corresponding line, gr. 3 and 4 | – | –100,0 | |
| 1.2) long-term financial investments, with the exception of contributions to authorized capital | Form No. 5, section “Financial investments”, amount of the corresponding lines, gr. 3 and 4 | 703,1 | ||
| 2. Amount of short-term financial investments – total, thousand rubles, including: | Form No. 1, page 250 | 3444,4 | ||
| Form No. 5, section “Financial investments”, line “Total”, gr. 5 and 6 | ||||
| short-term financial investments, with the exception of contributions to authorized (share) capital | Form No. 5, section “Financial investments”, sum of the corresponding lines, columns 5 and 6 | 3444,4 | ||
| 3. Balance sheet total, thousand rubles. | Form No. 1, pp. 300, 700 | 509 696 | 562 294 | × |
| 4. Share of all financial investments in the balance sheet, % |  | 1,2 | 0,3 | |
| 5. Share of the total balance of long-term and short-term deposits in other organizations, % | 1,1 | – | × | |
| 6. Share of the total balance of other long-term and short-term financial investments, % |  | 0,3 |
There is a cash shortage at OJSC Metallurgical Plant (as can be seen from Form No. 1 “Balance Sheet”, the amount of cash is many times less than the value of the most urgent obligations - for taxes and fees, to state extra-budgetary funds, to personnel for wages) . Thus, the organization is not able to make financial investments.
The return on investment in the authorized (share) capital of other organizations - 9.9% - is slightly higher than the return on assets in general - 7%. Investments in the authorized capitals of other organizations took place only at the beginning of the year. If we assume that these investments were not made during the year and the income was received from investments available at the beginning of the year, then the profitability of these investments will be 5%. Thus, the return on assets in general and on investments in the authorized (share) capital of other organizations is approximately the same.
There were no income from other financial investments in 2008 and 2007.
The share of all types of financial investments in the balance sheet of OJSC Metallurgical Plant is insignificant. Of the total financial investments at the beginning of the year, 97.1% is made up of contributions to the authorized (share) capitals of other organizations (). The remaining part of financial investments is represented by “other”. At the end of the year, only “other” financial investments take place.
The amount of financial investments by the end of the year decreased by 72.6% 
. However, at the end of the year there are “other” financial investments that do not generate income. It is advisable to implement them.
Inventory analysis
The purpose of the analysis is to assess the possibility of the existence of excess inventories.
Sources of information for the analysis are Form No. 1 “Balance Sheet”, Form No. 2 “Profit and Loss Statement”, Form No. 5 “Appendix to the Balance Sheet” (section “Expenses for ordinary activities”), Explanatory Note.
Inventories, according to the corresponding line of the balance sheet, include: raw materials, materials and other similar valuables, animals for growing and fattening, costs in work in progress, finished products and goods for resale, goods shipped, deferred expenses, other inventories and costs.
According to financial statements, it is possible to calculate only the shares in the balance sheet and the growth rates of various components of reserves. The analysis of these indicators consists of identifying their uncharacteristic values. If there are none, then no conclusions should be drawn from the analysis results.
To assess the possibility of having surplus materials and finished products (and goods), their turnover periods should be calculated.
The analysis is carried out in two stages. Each stage involves a comparison of indicators for the period under study and for the previous period.
First stage. Estimation of the share of reserves in the balance sheet and the rate of their growth. The analysis of these indicators consists of identifying their uncharacteristic values.
Second phase. Calculation of inventory turnover periods.
The materials turnover period shows the length of time their average balance remains in the warehouse before release into production or other targeted consumption. If the average balance of materials is consumed over a long period, then there is a surplus of materials.
Material turnover period (in days)
, (4.15)
where is the average balance of raw materials, supplies and other similar assets (calculated using a simple average, according to the corresponding line of Form No. 1 “Balance Sheet”, the calculation will be most accurate when using interim balance sheets);
– average daily consumption of materials (calculated by dividing the consumption of materials for one year () by the number of days in a year (365));
MH – material costs (form No. 5 “Appendix to the Balance Sheet”, section “Expenses for ordinary activities (by cost elements)”, corresponding line). “Material costs” are the same as “material consumption”.
In order to express the turnover period in months, the average balance should be divided by the average expense for one month.
The material turnover period calculated from financial statements is inaccurate. This is due to the fact that when calculating it, no other purposeful consumption of materials is taken into account, except for their release into production, for example, sale.
The turnover period of finished products is equal to the duration of their average balance in the warehouse before shipment to customers or other targeted consumption. A long period of turnover of finished products indicates the presence of surplus.
Finished product turnover period
(4.16)
where D is the number of days in the study period;
– average balance of finished products (calculated using a simple average according to Form No. 1 “Balance Sheet”, line “Finished products and goods for resale.” The calculation will be most accurate when using data from interim balance sheets);
– cost of goods sold, products, works, services (Form No. 2 “Profit and Loss Statement”, corresponding line).
The turnover period of finished products can be calculated not only for the year, but also for months and quarters when using intermediate forms No. 1 and No. 2. It should be borne in mind that Form No. 2 is compiled on an accrual basis from the beginning of the year. Therefore, when calculating, it is necessary to select data relating only to the month or quarter under study. The cost of goods sold for the month or quarter under study will be determined as the difference between these indicators in forms No. 2, compiled for the month or quarter under study and the previous one. When calculating the average balance of finished products, it is necessary to take into account that its balance at the beginning of the month or quarter under study is equal to the balance at the end of the previous month or quarter and is determined according to the balance sheet for the previous month or quarter.
The period of turnover of finished products according to financial statements will be calculated inaccurately. This is due to the following:
1) the targeted consumption of finished products is not taken into account, except for their sale, for example, use in their own production;
2) it is not taken into account that in Form No. 2 “Profit and Loss Statement” the total cost of not only sold products (goods), but also work (services) is given.
Data presentation forms for reserve analysis using the example of Metallurgical Plant OJSC are given in Tables 4.10 and 4.11.
Table 4.10 – Calculation of the share in property and indicators of stock dynamics
enterprises for 2008
| Index | Beginning of the year | The end of the year | Change | ||||
| abs. value, thousand rubles | share in the balance sheet, % | abs. value, thousand rubles | share in the balance sheet, % | abs., thousand rub. | shares in the balance sheet, % | growth rate, % | |
| Raw materials, supplies and other similar assets | 42 494 | 8,3 | 91 712 | 16,3 | 49 218 | 8,0 | 115,8 |
| Costs in work in progress | 10 441 | 2,0 | 25 465 | 4,5 | 15 024 | 2,5 | 143,9 |
| Finished products and goods for resale | 38 036 | 7,5 | 35 981 | 6,4 | –2055 | –1,0 | –5,4 |
| Goods shipped | 0,0 | 0,0 | 0,0 | 7850,0 |
End of table 4.10
Table 4.11 – Calculation of turnover periods for raw materials and finished products
enterprises for 2008
| Indicator, unit of measurement | Source of information or formula number for calculating the indicator | Magnitude |
| Balance of raw materials and materials at the beginning of the year, thousand rubles. | 42 494 | |
| Balance of raw materials and materials at the end of the year, thousand rubles. | 91 712 | |
| Average balance of raw materials and supplies, thousand rubles. | 67 103 | |
| Material costs, thousand rubles. | Form No. 5, section “Expenses for ordinary activities (by cost elements)”, corresponding line, gr. 3 | 251 658 |
| Turnover period of raw materials and materials, days | Formula (4.15) | |
| Balance of finished products and goods for resale at the beginning of the year, thousand rubles. | Form No. 1, corresponding line, gr. 3 | 38 036 |
| Balance of finished products and goods for resale at the end of the year, thousand rubles. | Form No. 1, corresponding line, gr. 4 | 35 981 |
| Average balance of finished products and goods for resale, thousand rubles. | – | 37 009 |
| Cost of goods sold, products, works, services, thousand rubles. | Form No. 2, corresponding line, column 3 | 294 994 |
| Turnover period of finished products and goods for resale, days | Formula (4.16) |
Of all reserves, a significant share in the property of Metallurgical Plant OJSC is occupied by raw materials (at the beginning of the year - 8.3%, at the end of the year - 16.3%) and finished products (at the beginning of the year - 7.5%, at the end year – 6.4%).
The turnover periods for materials and finished products are long – 97 days and 46 days, respectively. Consequently, there are excesses of these reserves, which leads to the diversion of funds from activities and to a shortage of financial resources.
Over the year, the balance of raw materials and materials increased by 115.8%. This increase is irrational if it occurred at the expense of those types of raw materials and materials that are available in excess quantities.
The balance of finished products did not change significantly over the year.
Related information.
Introduction
Analysis of financial investments
Conclusion
Bibliography
Application
Introduction
One of the key factors for the success of companies in an innovative economy is not so much concern about the low cost of producing products or services, but, on the contrary, the company’s ability to accumulate the maximum amount of funds raised for its own development - to ensure high leverage, primarily financial.
A reflection of the degree of confidence of investors and creditors and, at the same time, an indicator indicating the amount of free capital available to companies that can be used for development, are financial investments - long-term and short-term investments in the company’s securities and their authorized capital, and the provision of loans to them.
Financial investments are a very good indicator not only of the degree of business confidence, but also of general expectations about the development and long-term prospects of certain sectors of the economy. Therefore, a characteristic indicator is not so much the total volume of financial investments as the share of long-term investments in them.
All of the above determines the relevance of the topic of the test, the purpose of which is to study the methodology for analyzing financial investments.
Based on the goal, it is necessary to solve the following tasks:
study the concept and types of financial investments;
consider the methodology for analyzing financial investments.
The object of study in this work is financial investments as a type of enterprise asset.
The subject of study is the problems of analyzing financial investments in modern economic conditions.
.Analysis of financial investments
1 Concept and types of financial investments
Financial investments are investments in securities, authorized capitals of other organizations, also in the form of loans provided to other organizations.
Financial investments are classified according to different criteria:
By purpose:
Purchased for the purpose of generating income from them
Purchased for resale purposes
Depending on the period for which purchased:
Long-term (more than 1 year)
Short term
In connection with the authorized capital:
Financial investments for the purpose of forming authorized capital
Investments in debt securities.
According to PBU 19/02 “Accounting for Financial Investments”, in order to accept assets for accounting as financial investments, the following conditions must be met simultaneously:
transition to organizing financial risks associated with financial investments (risk of price changes, debtor insolvency, liquidity, etc.);
the ability to bring economic benefits (income) to the organization in the future in the form of interest, dividends or increases in value.
Types of financial investments are presented in Table 1.
Table 1
Types of financial investments
Financial investments include: Financial investments do not include: - state and municipal securities, - securities of other organizations, incl. bonds, bills; -contributions to the authorized (share) capital of other organizations (including subsidiaries and dependent business companies); - loans provided to other organizations, - deposits in credit institutions, - receivables acquired on the basis of assignment of the right of claim, etc. The composition of financial investments also takes into account the contributions of the partner organization under a simple partnership agreement. - own shares purchased from shareholders; - bills of exchange issued by the organization-issuer of the bill to the organization-seller when paying for products, works, services; - investments in real estate and other property that has a tangible form, provided for a fee for temporary use in order to generate income; -precious metals, jewelry, works of art and other similar valuables acquired for purposes other than ordinary activities. Assets that have a tangible form, such as fixed assets, inventories, as well as intangible assets are not financial investments
According to PBU 19/02, in order to accept assets for accounting as financial investments, the following conditions must be simultaneously met:
the presence of properly executed documents confirming the existence of the organization’s right to financial investments and to receive funds or other assets arising from this right;
transition to organizing financial risks associated with financial investments (risk of price changes, risk of debtor insolvency, liquidity risk, etc.);
the ability to bring economic benefits (income) to the organization in the future in the form of interest, dividends, or an increase in their value (in the form of the difference between the sale (redemption) price of a financial investment and its purchase value, as a result of its exchange, use in repaying the organization’s obligations, an increase in the current market cost, etc.).
The accounting unit for financial investments is chosen by the organization independently. It can be a series, batch, etc. homogeneous set of financial investments.
2 Legal support for financial investments
The conditions for accepting assets for accounting as financial investments are established by paragraph 2 of PBU 19/01 “Accounting for financial investments.” If these conditions are met in relation to the shares received by the enterprise (JSC) as a contribution, then these shares are taken into account as financial investments in the assessment agreed with the JSC participant.
In accordance with paragraph 19 of PBU 19/02, for the purposes of subsequent assessment, financial investments are divided into two groups:
financial investments that can be used to determine the current market value,
financial investments for which their current market value is not determined.
The primary documents on the basis of which financial investments are taken into account are: certificates of shares, bonds, bills and other securities; acts of acceptance and transfer of material assets; extracts from the register of shareholders; purchase and sale agreements; payment documents; inventory list of securities and strict reporting forms and other documents.
Checking the primary documents for accounting for financial investments is especially important, since these documents determine the special procedure for transferring ownership of securities.
The documents on the basis of which financial investments are accepted for accounting must indicate the purpose of the acquisition and the period during which the object is expected to be used.
According to Art. 144 of the Civil Code of the Russian Federation, inconsistency or absence of mandatory details of a security entails its nullity.
An organization's securities can be stored both in its offices and in depositories, with the organization's financial agents, etc.
According to the form of fixation of rights, documentary and uncertificated securities are distinguished. The documentary form of securities is a form in which the owner is identified on the basis of presentation of a properly executed security certificate, and in the case of its deposit, on the basis of an entry in the “Depo” account. An issue-grade security issued in book-entry form exists in the form of entries in personal accounts with the register holder or in “Depo” accounts with the depository. The record contains all the necessary details of securities (issuer, amount, holder, interest, etc.). The purchase and sale of a security, its donation, transfer is reflected by entries in personal accounts with the registry holder and “Depo” accounts with the depositary.
The procedure for determining the initial cost, receipt and subsequent evaluation of financial investments
Based on clause 11 of PBU 19/02, if the costs of acquiring securities are insignificant (except for amounts paid in accordance with the agreement to the seller) compared to their cost paid under the agreement, then the organization has the right to recognize such costs as other expenses in the period in which the securities were accepted for accounting. An organization can make a decision when an amount is considered significant if its ratio to the total of the relevant data for the reporting year is at least 5%. In this regard, the auditor needs to check whether a specific level of materiality is reflected in the order on the organization’s accounting policies. Consequently, if the costs are less than the level of materiality established in the accounting policy from the cost of acquired financial investments and the established size of the level of materiality is reflected in the accounting policy, then the organization can immediately charge them to other expenses. Thus, the organization has the right to keep track of the value of securities in two ways:
) include in the initial cost of securities all costs associated with their acquisition;
) include in the initial cost of securities only amounts paid to the seller, and the remaining costs, if they are unimportant, are reflected as other expenses.
The initial cost of financial investments at which they are accepted for accounting may change (clause 18 of PBU 19/02). As a rule, financial investments for which the current market value can be determined include financial investments in quoted securities.
The difference between the assessment of financial investments at the current market value as of the reporting date and the previous assessment of financial investments is attributed to the financial results of a commercial organization.
Financial investments for which the current market value is not determined include investments in authorized capital, under a simple partnership agreement, in certain types of securities, etc. They are reflected in accounting and reporting as of the reporting date at their original cost (clause 21 of PBU 19 /02).
If the current market value is not determined for debt securities, then a commercial organization is allowed to attribute the difference between their initial and par value during the period of their circulation evenly as income is due on them in accordance with the terms of issue to financial results (as part of operating income or expenses ) (clause 22 PBU 19/02).
In the financial statements for debt securities for which the current market value has not been determined, in accordance with paragraph 42 of PBU 19/02, the following must be disclosed, taking into account the materiality requirement:
the difference between the initial cost and the nominal value during their circulation period, accrued in accordance with clause 22 of PBU 19/02;
data on their valuation at discounted value, the amount of discounted value and the discounting methods used (disclosed in the notes to the balance sheet and profit and loss statement).
The initial cost of securities acquired for a fee includes, in accordance with clause 9 of PBU 19/02, the amount of the organization’s actual costs for their acquisition (excluding VAT and other refundable taxes). The list of actual costs is open and provides for the possibility of including other similar costs, with the exception of general business and other expenses that are not directly related to the acquisition of assets as financial investments.
If financial investments were acquired using borrowed funds, then you should be guided by clause 11 of PBU 10/99 and clauses. 14 and 15 PBU 15/01 “Accounting for loans and credits and the costs of servicing them.” Thus, the interest accrued by the organization on the borrowed funds provided to it before the acceptance of financial investments by the accountant is included in the initial cost of these investments.
Financial investments made as a contribution to the authorized (share) capital by another organization must be taken into account in the assessment agreed upon by the founders.
When an organization receives securities free of charge, they are valued at the market price on the date of acquisition. It should be noted that commercial organizations can give each other property worth no more than five times the minimum wage (clause 4 of Article 575 of the Civil Code of the Russian Federation). If at least one of the parties to the gift agreement is a non-profit organization or an individual, then the value of the gift is not limited in any way.
The initial cost of financial investments contributed to the contribution of the partner organization under a simple partnership agreement is recognized as their monetary value, agreed upon by the partners in the simple partnership agreement.
The initial cost of financial investments acquired under agreements that provide for the fulfillment of obligations in non-monetary means is determined in accordance with clause 14 of PBU 19/02 based on the value of the assets transferred or to be transferred by it. If it is impossible to determine the value of assets transferred or to be transferred by an organization, the value of financial investments is determined based on the cost at which similar financial investments are acquired in comparable circumstances.
If there is a steady decrease in the value of financial investments (clause 37 of PBU 19/02) due to the issuer showing signs of bankruptcy, a significant reduction in interest or dividends and other factors, then the organization must create a reserve for the depreciation of financial investments.
In order to recognize that investments are depreciating, the following conditions must be simultaneously present:
at the reporting date and at the previous reporting date, the accounting value of financial investments is significantly higher than their estimated value;
during the reporting year, the estimated value of financial investments changed significantly only in the direction of its decrease;
at the reporting date there is no evidence that a significant increase in the estimated value of financial investments is possible in the future.
3 Methodology for analyzing financial investments
financial investment appraisal
The main tasks of analyzing financial investments include:
analysis of directions for long-term financial investments;
analysis of composition and structure;
analysis of funding sources;
assessment of the effectiveness of long-term financial investments.
The source of information for the analysis of reporting until 2011 was Form No. 5 “Appendices to the Balance Sheet”, and from the 2011 report, the breakdown of long-term financial investments is reflected in the notes to the balance sheet and profit and loss statement.
An approximate form of analysis of the volume, composition, structure and dynamics of long-term financial investments is presented in Appendix 1.
Based on the results of the above analysis, conclusions can be drawn about the impact of changes in the value of each type on the deviation of the total amount of long-term financial investments. In addition, the table will clearly illustrate changes in the composition and structure of long-term financial investments that occurred in the analyzed period.
Significant attention is paid to indicators 8 and 9.
This is due to the fact that negative values of these indicators reflect the depreciation of the organization’s long-term investment portfolio, which is, of course, a negative phenomenon, and a change in them to a lesser extent characterizes a slowdown in the growth of the market value of the long-term investment portfolio and also cannot be assessed positively.
In the process of analyzing the effectiveness of financial investments, the volume and structure of investment in financial assets is studied with the determination of growth rates and profitability of financial investments both in general and for individual financial instruments. Let's present this in the form of the following table (see Table 2).
table 2
An example of analyzing the effectiveness of financial investments
Indicators 2010 2011 Deviations 1. Amount of long-term financial investments (thousand rubles) 35003900+400 including: in shares 29003315+415 in bonds 600585-152. Share (%) 100100 - including: shares 8385 + 2 bonds 1715-23. Income (thousand rubles) 495589 + 94 including: shares 435530 + 95 bonds 6059-14. Return on long-term financial investments (%) 14.115.1 + 1.0 including: shares 1516 + 1 bonds 1010-
Given in table. 2 data show that the profitability of financial investments increased in 2011 compared to 2010 by 1%, including due to:
structure of financial investments by 0.1%:
the level of profitability of certain types of investments by 0.9%:
The yield of securities is also compared with the guaranteed income, which is taken as the refinancing rate of the Bank of Russia or the interest on government bonds or treasury bills.
Assessment and forecasting of the economic efficiency of acquired or acquired securities can be made using both absolute and relative indicators, that is, by determining the current market price (at which acquisition is possible) and intrinsic value (based on the subjective assessment of each investor) or by calculating regarding profitability. In this case, the difference between price and value of a financial asset is that price is an objective measure, while intrinsic value is an estimate (the result of the investor's own approach).
The calculation of current intrinsic value can be made by dividing the expected cash flow for a certain period by the expected or required rate of return on the financial instrument, taking into account the number of periods of earnings.
If the amount of investment costs, that is, the market value of the security, is higher than the current value of the security, it is profitable for the holder of this security to sell it, but in this case there is no benefit for the investor to purchase it due to the fact that he will receive a profit less than expected.
Based on the above, the current value of a security depends on:
expected cash receipts;
the duration of the forecast period for generating income;
required rate of return.
4 Methods of assessment upon disposal of financial investments
There are the following methods of assessment upon disposal of financial investments:
A method of assessing the historical cost of each accounting unit of financial investments.
Valuation method based on average initial cost.
A method of assessing the historical cost of the first financial investments acquired (FIFO method).
With the method of assessing financial investments based on the initial cost of each accounting unit of financial investments, the cost of retiring financial investments is equal in this case to their original cost.
With the valuation method based on the average initial cost, the value of the securities being written off is determined by multiplying the number of retiring securities (for example, shares of OJSC “S”) by the average initial cost of one security of this type (shares of OJSC “S”). The average initial cost of one security of a given type is calculated as the quotient of dividing the cost of securities of a given type by their quantity, respectively, consisting of the cost and quantity of the balance at the beginning of the month and of securities received in that month.
Example 1 (data are provided for one type of securities)
Date Income Expense Balance Quantity Price per unit, tr. Amount, million rubles Quantity Price per unit, tr Amount, million rubles Quantity Price per unit, tr Amount, million rubles .Balance on the 1st date10010010.0---10010010.010-e501005.0609015-e601106.61005020-e801209.6-130Total290-31.2160107.617.2130107.614.0
1) Average initial cost of one security:
(10.0 million rubles + 5.0 million rubles + 6.6 million rubles + 9.6 million rubles) / 290 = 107.6 thousand rubles.
) Value of the balance of securities at the end of the month:
x 107.6 thousand rub. = 14.0 million rubles.
2 million rubles - 14.0 million rubles. = 17.2 million rubles.
x 107.6 thousand rub. = 17.2 million rubles.
This method can also be applied within a month for each date of disposal of securities within the month, using the estimate of the balance of securities determined by the average initial cost method on the date of the previous transaction (the so-called moving average initial cost method).
With the valuation method based on the historical cost of the first financial investments acquired (FIFO method), the valuation of securities is based on the assumption that the securities are sold within a month in the sequence of their receipt (purchase), i.e. the securities that first went on sale must be valued at the original cost of the first ones acquired, taking into account the value of the securities listed at the beginning of the month. When applying this method, the valuation of securities in balance at the end of the month is carried out at the actual cost of the most recent acquisition, and the cost of sale (disposal) of securities takes into account the cost of the earlier acquisition.
The cost of retiring securities is determined by subtracting from the sum of the value of the balance of securities at the beginning of the month and the cost of securities received during the month the value of the balance of securities at the end of the month.
Date Income Expense Balance Quantity Price per unit, tr. Amount, million rubles Quantity Price per unit, tr Amount, million rubles Quantity Price per unit, tr Amount, million rubles .Balance on the 1st date10010010.0---10010-e501005.0609015-e601106.61005020-e801209.6-130Total290107.631.2160100.616.1130116.215.1
) The value of the balance of securities at the end of the month based on the value of the latest receipts:
(80 x 120 thousand rubles) + (50 x 110 thousand rubles) = 15.1 million rubles.
) Cost of retiring securities:
2 million rubles - 15.1 million rubles. = 16.1 million rubles.
) Unit cost of retiring securities:
1 million rub. / 160 = 100.6 thousand rubles.
This method can also be applied within a month for each date of disposal of securities within the month, using the estimate of the balance of securities determined by the FIFO method as of the date of the previous transaction (the so-called rolling FIFO method).
Conclusion
Thus, financial investments are investments in securities, authorized capitals of other organizations, also in the form of loans provided to other organizations.
The development of market relations in Russia has led to the fact that in the economic practice of organizations, investments in financial assets, primarily such securities as shares, bonds, and bills, began to play an increasingly important role. Modern conditions require expanding the types of financial investments in securities by attracting derivative securities or derivatives.
The demand for the results of developments in the field of accounting, reporting and analysis of transactions with securities is determined not only by the widespread use of these financial assets by economic entities, but also by the inadequate solution of a number of issues of their accounting, which prevents the formation of complete and reliable information for the purpose of assessing investment risks by investors.
Thus, improving in modern conditions the methods of accounting and analysis of financial investments in securities is the most important task for both non-professional and professional participants in the securities market.
Financial investments can be purchased on the primary or secondary markets, received free of charge or from founders, or received from counterparties.
The return on investments in various financial instruments depends on the degree of default risk, liquidity, taxation, and inflation expectations.
When choosing possible directions for investing in the purchase of securities, the investor focuses primarily on the indicators of current profitability and risk inherent in these financial instruments.
Bibliography:
1.Civil Code of the Russian Federation (part two) dated January 26, 1996 No. 14-FZ // Collection of legislation of the Russian Federation. No. 5. art. 410
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