Fixed assets accounting

Fixed assets refers to items and assets used by organizations in their activities to make a profit. 

Not every tangible asset can be recognized as a fixed assets in accounting. There are a number of criteria according to which this becomes possible:

• the service life of the accepted asset is at least 12 months, or, if the service life is measured by production cycles, at least one operating cycle;
• as a result of the operation of the asset, the organization produces goods, performs work or provides services. The asset can also be used for organizational or managerial purposes, in other words, directly or indirectly used for profit, including being leased out;
• has the property of being subjected to wear. This item applies to all objects, with the exception of land plots.

Newly purchased machines, equipment, buildings, etc. are reflected in the account 08, then, after commissioning, are transferred to the account 01. Depreciation on them is reflected in the account 02.

Fixed assets accounting is accepted differently in accounting and tax accounting.

How to calculate the initial cost of the fixed assets

The accounting of fixed assets is carried out at the initial cost, but their reflection in the balance sheet occurs at the residual value. 

The residual is calculated as the initial minus the accumulated depreciation. 

According to paragraph 8 of PBU 6/01, the initial cost of the purchased Fixed assets is the actual expenses of the enterprise for the purchase, manufacture, construction of the object, net of VAT and other reimbursable taxes.

At the same time, the PBU (paragraph 8) regulates a specific list of amounts that make up the PSOS, this is:

• payment to the seller or supplier under the concluded contract;
• payment for delivery;
• the cost of bringing it to a suitable condition for operation;
• payment under the construction contract and other contracts;
• payment for receiving consultations, information services in connection with the purchase of a Fixed assets;
• customs payments;
• non-deductible taxes, state duties;
• remuneration to intermediaries who participated in the purchase of the Fixed assets ;
• other expenses incurred in connection with the acquisition of the . Fixed assets

Assets when reflected in the financial statements should:

• be no more than 40,000 rubles. As mentioned above, this requirement is canceled by the new standard, but the company can leave the usual limits, fixing them in the accounting policy;
• bring income to the company in future periods;
• be used for production, management or organizational purposes, as well as rented out. 

Accounting for operating systems that have a useful life of more than 1 year, and cost less than the established limit, are taken into account in a special way. They are not written off as expenses at a time. Thus, the account 10 is not used in this case.

The cost of the Fixed assets in accounting is reflected in the account 01.

Organizations periodically need to write off fixed assets. The write-off of the operating system accounting and tax accounting requires to be reflected without fail. Assets can be written off in various cases, for example:

• if they are worn out and unsuitable for further use, or are obsolete;
• they are supposed to be sold to another legal entity;
• it is assumed that they will be transferred to another legal entity free of charge;
• transferred to a newly created legal entity as a contribution to the authorized capital;
• the exchange is carried out;
• other cases.

If the fixed asset is moved within the organization (moving to workshops, branches, structural divisions, etc.), it is not considered retired. If the object is temporarily not operated, it is also not subject to write-off, and continues to be reflected in the company’s balance sheet.

What are the differences in tax accounting

The accounting of the Fixed assets in the tax accounting has its own peculiarities. Thus, an asset is recognized if:

• its service life is at least 1 year;
• the initial cost exceeds 100,000 rubles.
• the asset must be used for the purpose of making a profit by the enterprise (production of goods, performance of works, provision of services).

The accounting entries of the Fixed assets in tax accounting in terms of acceptance and write-off do not have significant differences. The write-off of the OS in the tax accounting is necessarily reflected in the income and expenses of the enterprise. To do this, it is necessary to calculate its residual value. In addition, when writing off, the costs of disposal, transportation, export, and other actions accompanying the procedure should be taken into account, as well as income if the object is sold, exchanged, etc. 

There are some differences when reflecting depreciation. We will consider them below.

How to reflect depreciation

The reflection of depreciation in accounting and tax accounting has certain differences. Accounting provides four methods:

• Straight-line accrual over the entire life of the equipment is called the linear method;
• the calculation of the amount based on the residual value is called the reduced balance method;
• the write-off at the end of the established service life is called by the sum of the numbers of years;
• if the amount is calculated depending on how many products were produced using this equipment, the method is called proportional.

The methods are selected by the organization independently and are reflected in the accounting policy. Depending on the group of fixed assets, the organization has the right to choose different methods of depreciation for each of them. That is, objects that have similarities in operation can be amortized according to the method chosen for them. If the tool is put into operation and one of the methods has already been selected for it, it cannot be changed in the future. 

There are a number of assets to which the use of any of the depreciation methods other than linear is not allowed. These include:

• buildings and structures with a useful life of more than 20 years, belonging to group 8 and 10;
• transfer devices and intangible assets with a useful life exceeding 20 years, belonging to group 8 and 10.
• facilities operated for the production of hydrocarbon raw materials.

The change of the fixed method is possible only from the beginning of the next tax period. Funds can be debited strictly in accordance with the accounting policy. The company has the right to make changes no more than once every five years.

The tax accounting of the  Fixed assets has differences from the accounting. Two calculation methods are allowed in tax accounting:

• linear;
• non-linear.

The chosen method should also be fixed in the accounting policy of the organization for tax accounting purposes. Most often, the linear method is used in practice. It has a number of advantages, in particular, it provides the smallest deviation from accounting data. 

The main document regulating accrual in a linear manner is the Tax Code (clause 2 of Article 259.1). Depreciation in this way is calculated separately for each object. 

The main document regulating the accrual of depreciation in a linear manner is the Tax Code. Depreciation in this way is calculated separately for each fixed asset. When choosing a non-linear method, depreciation will be charged for a group of assets. It slows down by the end of their use period. C (clause 5 of Article 259.2 of the Tax Code of the Russian Federation). 

What is the average annual cost of the Fixed assets for?

Every accountant is faced with the need to calculate the average annual cost of objects. The amount of fixed assets in accounting becomes necessary when calculating income tax. It can be calculated based on the balance, but in the future it can only be used for analytical purposes. On its basis, such indicators as capital productivity, capital intensity, and capital-to-weight ratio are calculated. For the calculation of income tax, the data obtained as a result of such calculation is not enough. 

How to account for fixed assets in 2021

Previously, Fixed assets accounting was carried out according to PBU-6/01. This standard of FSB 6/2020 was approved by the Ministry on 17.09.2020 and can be applied by enterprises from 01.01.2021 at their request. However, starting from 2022, its use becomes mandatory when generating reports. 

Let’s consider how to accept a Fixed assets object for accounting under the new rules. According to the new standard of the FSB 6/2020, the admission to the accounting of the OS is carried out according to the following rules:

• it is possible to take into account an object that is planned to be resold after a certain time as a Fixed assets . Recall that according to the rules established by the previous standard, the asset was recognized as property that was not subject to further resale;
• the company sets the value limit at which the asset is accepted independently and fixes it in the accounting policy. The company has the right to leave the usual limits, but they will still have to be included in the accounting policy;
• objects must necessarily be divided into types and groups;
• grouping of funds is carried out by type, that is, assets that have common principles of functioning and similar areas of application should be assigned to the same group;
• the need to check the value of the FA. According to the new rules, objects must be checked for the fact of impairment. At the same time, it is necessary to be guided by IAS 36.