№3(14)(2013)

Enterprise usually possesses a lot of assets. These are fixed assets, low-value tangible assets, and intangible assets. But how one should account those assets that do not fall under normal classification? Let’s give basic terms used in classification of assets and other non-current assets

Definition of terms

Assets - resources controlled by enterprise as a result of past events, use of which is expected to result in economic advantage in future.

Current assets - cash and cash equivalents that are not restricted to use, as well as other assets held for sale or consumption during operating cycle, or not more than 12 months from the balance sheet date.

Non-current assets – are all assets that are not current.

Contribution (deposit) - are means in monetary cash or non-cash form, placed by customers on their registered bank accounts on contract basis for fixed term storage or without such period and payable to depositor in accordance with Ukrainian legislation and terms of contract.

Interest rate for deposit – is a rate of interest determined by bank and depositor on deposits by mutual agreement.

Interest - charges for use of cash, cash equivalents or amounts due to enterprise.

Long-term receivables - are amount of receivables that arise during normal operating cycle and will be paid after 12 months from the balance sheet date.

Object of accounting and chart of accounts

Object of accounting are non-current assets that are not reflected in account of non-current assets.

Examples of other non-current assets are:

- Bank deposits, for which contract exceeds period of 12 months;

- Cash in bank, which could not be used during 12 months;

- Investments of lessor under financial lease;

- Accounting of notes issued under provision of long-term financial commitments;

- Long-term receivables on loans to employees;

- Long-term receivables on shipped goods, works and services;

- Long-term implemented advances for purchase of goods, works and services, other tangible property.

In accordance with the Instruction "On application of chart of accounts on assets, capital, liabilities and business operations of enterprises and organizations", approved by the Ministry of Finance of Ukraine from 30.11.1999, № 291 and registered with the Ministry of Justice of Ukraine on 21.12.1999 under № 893/4186, as amended, (hereinafter - Instruction №291), account 18 "Long-term receivables and other non-current assets" is used for accounts receivable of individual and legal entities, which does not occur during normal operating cycle and will be paid after 12 months from the balance sheet date, to account for assets whose use is expected to be impossible for 12 months from the balance sheet date, and to address other non-current assets that are not expressly provided for in other accounts excluding non-current assets.

Account 18 "Long-term receivables and other non-current assets" has the following sub-accounts:

• 181 "Payable for property transferred under a financial lease";

• 182 "Long-term notes receivable";

• 183 "Other receivables";

• 184 "Other non-current assets".

On debit of 18 "Long-term receivables and other non-current assets" they record appearance (increase) in long-term receivables and other non-current assets acquisition, loan - repayment (write-off), long-term receivables and other disposals of non-current assets.

Subaccount 181 "Payable for property transferred under financial lease," records net investment of lessor in financial lease as defined under Regulation (standard) of accounting 14 "Leases".

Subaccount 182 "Long-term notes receivable" keeps track of bills received in long-term receivables.

Subaccount 183 "Other receivables" is designed to account long-term debt, which is not reflected in other subaccounts of account 18 "Long-term receivables and other non-current assets", including payments to employees on extended long-term loans and the like, other calculations.

Sub-account 184 “Other non-current assets" keeps track of assets, whose use is expected to be impossible for 12 months from the balance sheet date, including cash and other assets that are not directly reflected in other accounts of non-current assets.

Analytical accounting of long-term receivables and other non-current assets is conducted on single customer, by type of debt, terms of its origin and maturity by type of other non-current assets.

The above instruction №291 provides accounts, which corresponds to account 18 "Long-term receivables"

Procedure for accounting of transactions with other non-current assets

Allocation of funds of enterprises in bank as a deposit (contribution) is performed under deposit agreement. As expected, usage of other non-current assets is more than 12 months, the mandatory duration for deposit contract is exceeding 12 months.

Correspondence of accounts in accounting of long-term bank deposits

Analytical accounting of other non-current assets is conducted on each type of other non-current asset.

Note that, in accordance with the Instruction #291, account 18 "Other non-current assets" also records long-term receivables.

Accounting of business transactions with long-term receivables

Upon reflection of receivables under long-term loans one should consider time of occurrence and maturity of loan. Part of long-term loan to be repaid within 12 months from date of balance shall be transferred on the same date in current accounts receivable. Such transaction is carried out on the basis of financial information on quarterly basis prior to preparation of quarterly financial statements.

Accounting requirements for long-term receivables on repayable financial assistance are similar to accounting requirements of receivables from long-term loans.

Operations on credits, financial assistance on return basis and to receive principal amounts (when returning), as well as transferring long-term debt in current accounts receivable are not included in tax expenditure and income. Under subparagraph 196.1.5 of the Tax Code of Ukraine operations to provide services related to collection, settlement and cash services, contribution, accommodation and reimbursement of funds under loan agreements, deposit, deposit (including retirement), management of funds and securities (corporate rights and derivatives), orders, provisioning, management and transfer of financial loans, loan guarantees and bank guarantees by grantor of such loans, guarantees or sureties are not subject to taxation.

Accounting requirements for long-term accounts receivable for settlements with buyers and customers, as well as suppliers of goods (works, services) in relation to advances are similar to accounting requirements for receivables mentioned above.

Some financial professionals believe that this account can not record long-term receivables for goods and services, and in fact, this kind of long-term debt is not included in "Other tangible assets." But let us not agree with this opinion. We believe that this account should record long-term receivables that appeared for shipped goods, works and services, as well as its long term advances for acquisition of goods, works, services, stores and other operations. Nature of long-term receivables appearance is not essential, it is only important that period of repayment is potentially more than 12 months.

In accordance with instruction №291, account 18 "Long-term receivables and other non-current assets" is intended for accounts receivable of individual and legal entities, which does not occur during normal operating cycle and will be paid after 12 months from the balance sheet date.

Indeed, till 01.01.2007 this account was not provided for record keeping of long-term receivables. As such, subaccount 183 "Long-term receivables" did not exist. However, the Ministry of Finance of Ukraine from 11.12.2006 by Order №1176 replaced the name of account by another, and sub-accounts of account 18 were complemented with sub-account 183.

Currently, accounts receivable, which has signs of long-term, is to be accounted for on the above sub-account.