Before we start talking about the valuation of fixed assets, let us express an idea, the essence of which seems somewhat seditious. It lies in the fact that for an accountant the term “fixed assets” implies, first of all, a cost reflection of the availability of property capital that the organization has. The material content of this phrase in accounting is very secondary.
In fact, in accounting work there is no fundamental difference in how many of any products are planned to be produced today on a specific machine installed in the workshop. Its material indicators serve in accounting work only as identifiers that allow one to “personify” an object. All accounting procedures in relation to any object are carried out in its monetary and value terms.
This is what makes the valuation of fixed assets particularly important for all aspects of the work of an accountant in accounting for fixed assets.
Types of fixed asset valuations
In the management activities of any organization, a normatively established system of assessing the value of property is used, used for various purposes of cost measurements - accounting, analysis, forecasting, generation of accounting, statistical and tax reporting data.
Any private situations, such as sales, transfers through barter transactions, an organization receiving a loan under collateral schemes, determining the amount of insurance compensation or judicial settlement of property disputes, are conducted on the basis of data determined in this property assessment system.
There are three basic types of valuations applied to the fixed assets of an enterprise:
- Initial;
- Restorative;
- Residual.
Here we should immediately mention the term “book value”, used in accounting to denote valuation. In practice, it is often assumed that the initial and book values are completely identical. However, this is not entirely true.
The borderline point that introduces differences between them is the case of revaluation of fixed assets. The cost of objects that have been revalued is the replacement value, and these objects are subsequently taken into account in the balance sheet.
Property acquired after revaluation is taken onto the balance sheet in its initial valuation. The amount at which both fixed assets are accounted for is the balance sheet amount. However, in terms of economic content, the book value of some is replacement value, while others are original.
This is evidence that in practice property accounting is carried out in a mixed form of assessments. Further, to denote the cost at which fixed assets are accounted for, we will use the concept of “book value”, if necessary indicating the category of its filling, initial or replacement.
Initial
Determines the value at which the property unit was registered as a fixed asset. The formation of the initial assessment of property is directly dependent on the method of its receipt.
When purchasing or creating or constructing, the initial amount is formed based on the total actual costs of acquisition or creation. In case of receipt in the form of a contribution to the authorized capital, the initial cost is established according to the assessment agreed upon by the founders. The basis for the formation of the initial amount upon receipt under exchange agreements (barter) is the amount of material assets transferred in return. If the objects are received free of charge, the current market price of similar ones is recognized as the initial price.
In addition, in all cases, when forming the initial amount, the costs of delivery, storage and installation, as well as other expenses directly related to the implementation of the facility, are taken into account.
Thereafter, the original carrying amount generally remains unchanged. A change in the initial amount may occur in the process of its clarification during revaluation or undertaking measures that significantly change the condition of the object. Moreover, such a change can be either an increase, in cases of major repairs or modernization, or a decrease in the case of partial liquidation.
Restorative
In practice, situations arise when the current book value no longer corresponds to the actual economic situation in the market. In this case, the organization can exercise its right to revaluate the property. During the revaluation, the balance sheet valuation of a fixed asset is adjusted taking into account data on the market value of the costs of creating or purchasing an object identical to the revalued one.
As a result of revaluation, the replacement cost of fixed assets is established. It is the replacement amount from this moment that is accepted as their book value. To establish the amount of an object in a restoration assessment, various sources of information can be used, including:
- Information from manufacturing companies of identical objects;
- Information on price levels obtained from government organizations or special public sources;
- Expert assessment by independent specialists
- It should be noted that in the future, previously revalued fixed assets must be revalued so that there are no significant differences in the current replacement cost of the revalued objects.
Residual
For the full management of economic processes, economic information about the state of property capital plays an important role. One of its main indicators is the residual value of property, defined as the difference between the book value (initial or replacement) value of fixed assets and the amount of depreciation.
Thus, the residual valuation of an object reflects that portion of the cost of the fixed asset that has not yet been transferred to the manufactured product at the moment.
Based on the residual value, the degree of deterioration of the property is determined and the need for its renovation is identified. Funds with zero residual value should be removed from the property due to their economic inefficiency.
In cases of reconstruction, modernization, major repairs, or completion of fixed assets, their residual value increases in an amount calculated based on the amount of costs for these activities.
Some points related to the valuation of fixed assets in tax accounting
In both accounting and tax accounting, there is one system of categories - initial, replacement and residual values. However, it should be noted that the final results of the formation of the initial cost for accounting and tax registers may differ.
This is often due to the moment of accounting for amount (exchange) differences that arise during the acquisition of objects, the payment for which is determined in relation to foreign currency. The total (exchange rate) difference in such cases is determined as the difference between the ruble equivalent of the payment debt in foreign currency terms on the date of its occurrence and on the date of its repayment. The differences are calculated at the official rate established by the Central Bank of the Russian Federation.
In the Regulations defining the procedure for accounting for fixed assets, the difference between exchange rates that arose during the period of payments for the acquired property is included in the costs incurred by the enterprise upon receipt of fixed assets. At the same time, the Tax Code, namely Article 256, clearly interprets exchange rate differences as falling into the category of non-operating income or expenses.
The result is an increase or decrease in the "accounting" original book value of the fixed assets relative to the original valuation calculated for tax purposes.
Article 264 of the Tax Code also provides food for discrepancies. A number of types of costs, in accordance with this article, attributable for tax purposes in accordance with this article to other expenses associated with production and sales, on the basis of PBU, can also be included in the initial cost of property.
It is equally important to take into account the restrictions imposed by the tax code on the procedure for determining the replacement amount of an object. Chapter 25 establishes that inclusion in income or expenses taken into account for taxation includes only those results of revaluations that were taken into account before 01/01/2002.
The results of revaluations made later, or the results of revaluations made before the specified date, but accepted for accounting after it, are not accepted for determining the replacement cost and calculating depreciation for tax purposes.
An indicator reflecting the actual cost of a building in modern conditions..."
Source:
ORDER of the Ministry of Defense of the Russian Federation dated June 27, 1996 N 260
"ON APPROVAL OF THE GUIDELINES FOR MAINTENANCE, CURRENT AND MAIN REPAIRS OF BUILDINGS AND FACILITIES OF THE MINISTRY OF DEFENSE OF THE RUSSIAN FEDERATION"
Official terminology.
Akademik.ru.
2012. See what “replacement cost of a building” is in other dictionaries: replacement cost of the building
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Replacement cost is the cost of fixed assets, adjusted from the original value as a result of the revaluation of the object. Current legislation allows commercial organizations to regularly (no more than once a year) review the cost of fixed assets, focusing on changes in market prices and taking into account projected inflation.
The possibility of property revaluation exists for both fixed assets and intangible assets (intangible assets). The application of this norm is regulated by PBU 6/01 and PBU 14/2007, although in relation to intangible assets the legislator uses the term “current market value” with an approximate meaning to the concept of “replacement value”. Let's talk about how to calculate the replacement cost of fixed assets and what you should pay attention to.
Initial and replacement cost of fixed assets
Production assets serve for a long time, gradually wearing out and transferring their value to the finished product. Therefore, their accounting is structured so that you can immediately see the initial price of the object, its gradual loss (wear and tear) and the residual value. There are three costs of fixed assets: initial, residual and replacement.
The initial cost reflects the real costs of purchasing property (price of the object + costs of installation, transportation, etc.). It does not change, unless we are talking about reconstruction, completion or partial liquidation of the facility. The loss in value of assets is reflected in their valuation at residual value. This is the original cost reduced by the amount of wear and tear.
Over time and under the influence of an ever-changing market, the original cost no longer corresponds to the actual value of the property. Therefore, the question arises of restoring the price to reflect market realities. Such compliance is achieved through revaluation, and the value of the revalued asset becomes replacement value.
Original replacement and residual value
Let's talk in more detail about the categories of replacement cost. The cost of modern analogues of assets in relation to already used objects subject to revaluation is the full replacement cost. And since operating assets are already worn out to some extent, their restored value cannot be full, but only close to the market value and taking into account accrued depreciation.
And here the concept of original restored value is relevant. Those. after the revaluation of the object, its initial value becomes the initial replacement value, i.e., the original price of the asset at the current moment.
The revaluation rule is the proportional distribution of the increase (or decrease) in value to the asset itself and its depreciation, i.e. not only the price of the object is recalculated, but the amount of depreciation on it. The recalculated cost minus depreciation will be called the residual replacement cost.
How is the replacement cost of fixed assets determined?
To determine the replacement cost of an asset, different methods are used. Analyze:
- prices for similar objects according to manufacturers and trade organizations;
- information from statistical authorities,
- expert opinions on the current cost of similar operating systems.
The “new” cost of objects is established by indexation or direct recalculation based on data for similar products. As a rule, appraisers are involved in revaluation, who revaluate each object, taking into account all market criteria and depreciation of assets.
The revaluation procedure is preceded by a lot of organizational work. Necessary:
- select OS objects that will be revalued;
- enter into an agreement with a licensed appraiser;
- issue an order to conduct a revaluation, which should include a list of the property being valued. It states:
Name of objects;
Dates of their acquisition/manufacturing, commissioning.
The main criteria for determining the replacement cost of fixed assets for revaluation are:
Initial or current value (if the object was previously revalued) at the beginning of the reporting year;
Depreciation accrued over the period of operation of the facility.
Pursuing the goal of approaching the market value of fixed assets, revaluation regulates the original cost, so the result of revaluation may be an additional valuation or a discount of funds.
Replacement cost: formula
Having established the value of the full replacement cost, it is possible to determine the replacement cost of fixed assets after revaluation. It is found by multiplying the total replacement cost by the ratio of the residual value to the original value (before revaluation). According to the formula:
C in = C p x K ots, where
C in – replacement cost of the object,
C p – initial cost,
K ots – evaluation coefficient.
Example
According to a specialist, the initial cost of the machine (RUB 100,000), which has been operating in the enterprise for 3 years (36 months), has decreased by 30% compared to market analogues. When revaluing the asset, a coefficient of 1.3 was applied and the replacement initial cost of the object was calculated:
C in = 100,000 x 1.3 = 130,000 rub.
To be fair, we note that the correction factor is not always used. The replacement cost of an object can be determined based on an analysis of the market situation and the price of analogue products, confirmed by documents.
Let's go back to the example:
After establishing the price of the machine at the current moment, it is necessary to calculate its current residual value. Let's calculate it using the formula:
C ov = C pv x C ost / C per, where
C ov – residual replacement cost,
C pv is the full (initial) replacement value, and C ost and C per are the residual and initial costs of the asset before revaluation.
Let’s assume that the service life of the machine established in the organization is 8 years (96 months). Then
C rest = 100,000 – (100,000 / 96 x 36) = 100,000 – 37,500 = 62,500 rub.
Let's substitute the values into the formula:
C ov = 130,000 x 62,500 / 100,000 = 81,250 rubles.
Thus, the initial replacement cost of the machine on the day of revaluation amounted to 130,000 rubles, its current residual value increased from 62,500 rubles. up to 81,250 rubles, and accrued depreciation amounted to 48,750 rubles. (130,000 – 81,250) instead of 37,500 rubles. before revaluation.
The replacement cost of fixed assets is usually called the cost that is used when assessing any object related to fixed assets after the completion of the revaluation procedure.
That part of fixed assets that has a value within the boundaries established by the organization’s accounting policies, which should not exceed 20,000 rubles per unit, can be reflected in the accounting reports as a component of inventories of a material and production nature. In order to ensure the proper level of security of these documents, you will need to take care of organizing appropriate control over all their movements.
For tax purposes, all objects priced up to 10,000 rubles must be immediately written off as material costs.
The price of OS objects cannot be changed. True, it is worth taking into account a number of factors that allow this possibility: reconstruction of facilities, their modernization, incomplete liquidation, or carrying out work to retrofit fixed assets.
The revaluation procedure is carried out using direct conversion method or through documentary evidence of market value. The main objective of such procedures is to determine the true value of all property belonging to fixed assets by bringing the primary value to market prices and to the existing conditions during revaluation.
The revaluation procedure can be carried out either by primary, and by residual or restorative price.
According to the primary cost, fixed assets will be accepted for accounting. The initial price represents the amount of actual expenses of the enterprise that were spent on the purchase, construction or creation of fixed assets, in addition to VAT and other types of tax levies subject to reimbursement.
The primary price of fixed assets that was made as a contribution to the authorized capital of the company is their monetary value, which is agreed upon by a collegial decision of the founders of the commercial structure.
The primary cost of fixed assets that were acquired by the company under a gratuitous donation agreement is their market value, current at the time of acceptance on the balance sheet.
The replacement cost of fixed assets corresponds to the amount of financial costs that the company is obliged to pay on the date of re-evaluation in the event that there is a need to replace an object.
You can determine the replacement price of an OS using:
- Information on similar materials provided by the manufacturer itself.
- Cost data obtained from statistical organizations or from sales representatives.
- Information about the cost that is published in special literary and information publications.
- Assessments carried out by BTI employees.
- Expert opinions on the current value of the fixed assets.
Evaluation, revaluation and change
As part of accounting, it is regularly carried out fixed asset valuation procedure. Today it is customary to distinguish the following types of OS revaluation:
- at primary cost;
- at replacement price;
- at the residual price.
According to the existing procedure, all fixed assets must be reflected in accounting records according to their primary or replacement price.
Before revaluing fixed assets that are part of a certain homogeneous category of material objects, it is necessary to remember that a similar procedure will have to be performed on an ongoing basis in the future. This is done to ensure that the cost of these objects, reflected in accounting reports, does not have serious differences from the replacement price.
Before revaluing an operating system, some preparatory work is required. There is a process of issuing an order or other administrative document regarding the revaluation. In addition, you will need to prepare a complete list of operating systems that will be subject to this procedure. In such a list it is necessary to indicate the following information:
- name of a specific object;
- date of its purchase or manufacture, construction;
- the date of acceptance of such objects for accounting in the organization’s accounting department.
In addition, it is necessary to verify the existence of such objects. As source data To organize revaluation, the following may be used:
- the original or current price if this object was already subject to revaluation as of December 31 of the previous reporting year;
- the volume of accrued depreciation charges as of the same date for the entire period of operation of the facility;
- documentary evidence of the current value as of January 1 of the reporting year.
The revaluation procedure involves recalculating the primary as well as the current value. If a specific object has already undergone the revaluation procedure, then checking the amount of accrued depreciation.
Existing calculation methods
There are several methods for calculating the replacement cost of an asset.
Comparative Unit Methodology is the process of calculating the cost of constructing one comparative building unit. The price of one comparative unit of an analogue is adjusted from the point of view of existing differences with the compared objects.
To calculate the full price of the object in question, you need multiply the adjusted cost of the comparison unit by the number of comparative units. Determining the amount of costs is often carried out using reference and regulatory documentation, namely, the aggregated parameters of the construction price and the aggregated parameters of the replacement price.
Using the following formula, you can calculate the cost of a real estate property:
Tso = Tsm2 * Po * Kop * Kon * Kom * Kov * Kopz * Konds, where
Tso– the price of the object undergoing the evaluation procedure, Tsm2– the price of construction of one square meter of area, By– the total area of the property being assessed, KOp– correction factor for the probability of detecting a discrepancy between the actual area of the object and the data available from the BTI and the actual area of the building (KOp = 1.1-1.2), CON– coefficient that takes into account the identified discrepancies between the object being assessed and the selected standard building (for identical objects KOn = 1), KOM– coefficient that takes into account the location of the real estate, KOv– time coefficient, which takes into account the difference between the cost of construction and installation work at the start of construction and the date of assessment procedures, KOpz– a coefficient that takes into account the profit margin of an organization acting as a developer, KONDs– coefficient that takes into account the amount of VAT.
One of the most important aspects when applying such a technique can be considered selection of a standard analogue. To do this correctly, you need to take into account the following factors, as the same functional purpose, similarity of existing physical parameters, approximate age, other parameters.
Method of dissection into individual components differs mainly from the comparative unit method in that the price of the building is calculated as the sum of the prices of each individual building element. The cost price for each individual element is calculated based on both direct and indirect costs.
Z = (∑ Obj * Cj) * Kn, where
Tsz– the price of construction of an immovable object, Aboutj– volume of the j-th element, Tsej is the price of one unit of volume, Kon is a coefficient that takes into account the differences between a specific object and the selected standard building (for similar buildings Kon = 1).
Quantitative Research Methodology is the basis for using the previously described methods for calculating the size of the replacement cost of real estate. It allows you to obtain the most accurate data. At the same time, it is worth noting the fact that this method is the most expensive. In this regard, the person who will be involved in the assessment must have a sufficient level of knowledge and have appropriate theoretical training, supported by practical experience.
2.2. Replacement cost of fixed assets
Replacement cost– the cost of fixed assets in modern conditions, with modern prices and technology, is the cost at which fixed assets are valued after revaluation.
Fixed assets with a value within the limit established in the accounting policy of the organization, but not more than 20,000 rubles per unit, may be reflected in accounting and financial statements as part of inventories. In order to ensure the safety of these objects, proper control over their movement must be organized.
For tax purposes, objects worth up to 10,000 rubles at the time of commissioning are written off as material expenses at a time.
The cost of fixed assets in which they are accepted for accounting is not subject to change, except in cases of completion, additional equipment, reconstruction, modernization, partial liquidation and revaluation of fixed assets.
Over time, the initial cost of fixed assets differs from the initial cost of similar fixed assets acquired or manufactured in later periods. In order to eliminate any deviations that arise, fixed assets are revalued.
The purpose of revaluation of fixed assets is to determine the real value of fixed assets by bringing their original value into line with market prices and reproduction conditions on the date of revaluation.
In accordance with paragraph 15 of PBU 6/01, a commercial organization may, no more than once a year, at the beginning of the reporting year, revalue groups of similar fixed assets at current (replacement) cost. Revaluation is carried out by indexation or direct recalculation based on documented market prices.
Under current (replacement) cost refers to the amount of money that must be paid by the organization on the date of revaluation if it is necessary to replace any object. The following data can be used to determine this cost:
– data on similar products received from manufacturing organizations;
– information on price levels available from state statistics bodies, trade inspectorates and organizations;
– assessment of the technical inventory bureau;
– expert opinions on the current (replacement) cost of fixed assets.
When deciding on the revaluation of fixed assets included in a homogeneous group of objects, organizations must remember that in the future they will have to regularly carry out revaluation so that the cost of these objects, at which they are reflected in accounting and reporting, does not differ significantly from the current (replacement) cost.
Before revaluation of fixed assets, preparatory work is carried out, in particular, an order or other administrative document on revaluation is drawn up, and a list of fixed assets subject to revaluation is prepared. The list indicates the exact name of the objects, the date of their acquisition, construction, manufacture, and the date of acceptance of the objects for accounting. The availability of these objects is also checked.
In accordance with paragraph 46 of Methodological Instructions No. 91n, the initial data for revaluation are:
– initial cost or current (replacement) cost, if the object has previously been revalued, as of December 31 of the previous reporting year;
– the amount of depreciation accrued on the same date for the entire period of use of the object;
– documented data on the current (replacement) cost of revalued objects as of January 1 of the reporting year.
