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Abstract

The content

Introduction

Capital investments, which play a key role in the renewal and increase of production resources, and accordingly in ensuring certain rates of economic growth, constitute the material basis for the development of production, and are important both for the enterprise that implements them and for the country's economy as a whole. The study of the problems of information management of costs and sources of financing of capital investments showed that, despite the substantial contribution of scientists to solving this problem, many issues remain unworked to date. In particular, the problems reflecting the specifics of the costs associated with the renewal of fixed assets are not fully investigated. The accounting and reporting does not provide detailed information on the formation and use of sources of financing capital expenditures.

1. Theme urgency

In the context of a protracted financial and economic crisis, the functioning of national enterprises requires the development of fundamentally new approaches to the content of accounting and analytical information, the quality of which determines the effectiveness of decisions made and the competitiveness of business. In this context, the need to improve about the account as a basis for the information support of the enterprise management system, of which capital investment accounting is an important component, acquires particular relevance. So, today a lot of issues related to accounting for capital investments and their reflection in reporting are conceptually unsubstantiated, organizationally and methodologically unresolved, informationally unsecured.

The relevance of the chosen topic is due to the fact that the analysis of investments made in the form of capital investments makes it possible to determine the availability of the necessary resources and the possible directions for attracting them to improve the efficiency of the enterprise. Improper implementation of capital investments may adversely affect technical development and improvement of technology, since in the future may require significant funds for the reconstruction and modernization of fixed assets.

2. Goal and tasks of the research

The purpose of this work is to identify inconsistencies and inconsistencies in the accounting and tax accounting of capital investments, as well as the development of specific recommendations for their settlement.

Main tasks of the research:

  1. Justification of the nature and values of capital investments.
  2. Consideration of the state of the problem of capital investment.
  3. Showing ways to improve capital investment accounting.

Research object: accounting of capital investments.

Research subject: theoretical, methodological and practical issues of accounting for operations with capital investments.

3. Review of research and development

Foreign scientists, such as K. Marx [1], as well as well-known domestic scientists such as: V.A. Gavrilenko [2], Leonova L.A. [3], V.V. Verbitskaya [4], L. Lovinskaya [5], F.F. Butinets [6], and others. However, despite all efforts in this direction, this problem was not fully resolved.

4. The essence and value of capital investment

At the present stage of development of accounting in different sources there is no clear definition of the category and composition of capital investments.

The category “Capital investments” is defined in the Law of Ukraine “On investment activity” [7], according to which the results of capital investments are the rebuilding of fixed assets and the increase in inventories.

Under the capital investment understand the cost of construction, manufacturing or acquisition of fixed assets, as well as the reconstruction, expansion and technical re-equipment of existing enterprises. Sources of financing capital investments can be either own funds (profits, depreciation, budget financing, financing of third-party organizations in the form of equity participation in construction, etc.).

From the position of the RAS, paragraph 7, paragraph 4 – capital investment in non-current tangible assets – the costs of construction, reconstruction, modernization (other improvements that increase the initial (revalued) value), manufacturing, acquisition of tangible non-current assets (including non-negotiable tangible assets intended to replace existing ones, and equipment for installation) carried out by the company [8].

As for the GCC, it also contains the definition of the term "capital investment". According to clause of the GCC capital investment – business transactions that involve the acquisition of fixed assets and intangible assets to be depreciated in accordance with the rules of this Code. And if money is received from the budget on a non-refundable basis with the condition of their use during operations involving the acquisition of fixed assets and intangible assets to be depreciated in accordance with the requirements of the TCU, then this is nothing more than targeted financing of capital investments from the budget [9].

Capital works can be performed either by contracting (that is, by specialized construction and installation organizations on a contractual basis) or by economic means (that is, by the enterprise itself). The accounting for the cost of capital investments is regulated by the Provision (standard) of accounting 16 "Expenses". In the debit of account 15 “Capital investments” and its subaccounts reflect the costs (for the acquisition and creation of tangible and intangible non-current assets), for the loan – the write–off of the specified costs for completed and commissioned objects. Analytical accounting of capital investments is conducted respectively by type of fixed assets, other non-current tangible assets, intangible assets, as well as by individual objects of capital investments.

The absolute efficiency of capital investments for various levels is calculated according to the following formula:

Absolute capital investment efficiency

Figure 1 – Absolute capital investment efficiency

where Еn – coefficient of absolute efficiency of capital investments,

NCP – increase in regulatory net output,

К – capital investment that caused the increase.

So, according to P(C)BU 7 “Fixed assets”, the initial cost of fixed assets is increased by the amount of expenses related to the improvement of the object (modernization, modification, completion, additional equipment, reconstruction, etc.), which leads to an increase in future economic benefits originally expected from using the facility. Taking into account the influence of technical and technological features of areas of capital investment in fixed assets can be allocated:

         
  1. new construction;             
  2. modernization, reconstruction, expansion and technical re-equipment of existing enterprises;             
  3. doing research and development;             
  4. purchase (purchase) of fixed assets.          

5. Classification of capital investments

From the point of view of the sources of funding used, for accounting purposes it is advisable to classify capital investments as follows:

                
  1. capital investments made at the expense of own funds (depreciation, profit, tax minimization);             
  2. capital investments made from borrowed funds (loans, loans);             
  3. capital investments made at the expense of local budgets.         

In economic literature, based on the direction of their investments, are classified into real and portfolio (fig. 2).

Classification of investments by objects of their investments

Figure 2 – Classification of investments by objects of their investments: 1) Real; 2) Portfolio (financial)
(animation: 9 frames, 10 cycles of repetition, 40 kilobytes)

This classification allows you to more clearly present the essence of investment, as well as their role and importance for each business entity. Real investments are investments in fixed capital (capital investments), in working capital and intangible assets. From this it follows that real investment is aimed at increasing its productive capital. Portfolio, or financial, investments are investments in securities (stocks, bonds, etc.), charter capital of other commercial organizations, as well as loans provided.

6. State of the problem of capital investment

Taking into account the debatableness of individual theoretical positions, their practical significance during the decline of investment activity of national enterprises, we consider it necessary to conduct a comprehensive scientific study of modern problems of capital investment accounting in order to solve them at legislative, organizational, methodical levels and practical approbation in the context of specific enterprises. To this end, a number of unresolved and debatable problems in accounting for capital investments of a general theoretical, methodological and organizational nature are highlighted. The most important of which, in our opinion, are the following.

1. Lack of systemic classification of capital investments. Thus, in existing regulatory documents, educational and scientific literature it is difficult to find a unified systemic classification of capital investments. Unfortunately, neither P(C)BU 7 “Fixed Assets” [8], nor Methodological Recommendations for Accounting of Fixed Assets, nor Instructions for the Use of the Chart of Accounts [10] do not contain any specific grouping of capital investments. And only on the content of the official definitions and in the context of the characteristics of the account 15 "Capital investments" can be identified objects in which capital investments can be made.

2. On subaccount 151 "Capital construction" reflects the construction costs, which is carried out both by economic and contractual way for the own needs of the enterprise.

An important condition for the contractual way of performing the work is the condition for making the costs of production directly by the contractor. This subaccount keeps records of the equipment to be erected during the construction process, and advance payments to finance this construction. In our opinion, subaccount 151 “Capital construction” requires some reforming, namely: opening third-order accounts for types of improvements 1511 Capital investment in modernization, 1512 Capital investment in reconstruction, 1513 Capital investment in completion, 1514 Capital investment in reorganization, 1515 Capital investments in conversion and other types of improvements, 1516 Capital investments in repairs that are capitalized, 1517 Capital investments in repairs that are not capitalized.

3. It is impossible to mix current and capital repairs, as current repairs are aimed at maintaining the operability of equipment, and major repairs are aimed at restoring the reliability of equipment and obtaining economic benefits from its use in a future period. Also, the allocation of the cost of capital repairs to production costs in the current period, which seems to correspond to paragraph 15 of P(C)BU 7, will lead to a violation of the principle of matching income and expenses. It should be said that Gavrilenko V.A. He believes that it is necessary to correctly reflect capital repairs in fixed assets by assigning capital repairs to an increase in the residual value of this equipment through a decrease in its wear and tear, which is recorded as follows: Account Credit 15 “Capital Investments”, Debit Account 131 “Depreciation of Fixed Assets”. At the same time, the initial cost of the equipment remains unchanged [1].

Conclusion

Capital investments, which play a key role in the renewal and increase of production resources, and accordingly in ensuring certain rates of economic growth, constitute the material basis for the development of production, and are important both for the enterprise that implements them and for the country's economy as a whole.

At enterprises, primary and analytical accounting is often not fully adapted to account for costs and sources of funding for all stages of capital investment. From accounting data it is not always possible to obtain complete information about a specific source of financing capital investments. The generalized accounting and reporting on the actual costs and sources of financing of capital investments in each area are not up to the mark.

The main problems in accounting for capital investments are: imperfection of their definition, unsettled recognition criteria and assessment procedure, imperfection of synthetic and analytical accounting methods, groundlessness of methodological approaches to accounting for capital investments in improving non-current assets.

Thus, the recommendations proposed in the article on reforming the accounting of capital investment operations ensure the elimination of the contradictions arising in their accounting and make the financial statements real.

When writing this essay, the master's work is not yet completed. Final Completion: May 2019. Full text of the work and materials on the topic can be obtained from the author or his manager after the specified date.

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