If a company for some reason temporarily does not use fixed assets (hereinafter − FA), it can make a decision to preserve them. How it should be registered and reflected in accounting, and FA should be preserved or not – in the following.
Registration of preservation
It should be recalled, FA preservation is a complex of measures aimed at long-term (but not more than three years) preservation of FA of companies in case of termination of production and other economic activity with the possibility of further restoration of their functioning (para. 2 of the Regulation on the procedure for preservation of the main productive assets of enterprises, approved by the Resolution of the Cabinet of Ministers of Ukraine of 28.10.1997, No. 1183; hereinafter − Regulation No. 1183).
In order to preserve FA it is necessary:
- in accordance with the order of the head of the enterprise to create a special commission that will assess the feasibility of preservation;
- in the case of a positive decision of the commission on preservation, make an act on the temporary withdrawal of FA from the production process and preservation thereof;
- upon completion of work related to preservation of FA, to make an act on the acceptance of FA for preservation.
Accounting aspects of preservation
FA, which to be preserved, are not subject to depreciation (para. 27 of the Guidelines on Accounting for Fixed Assets, approved by the Order of the Ministry of Finance of 30.09.2003, No. 561, hereinafter – Guidelines No. 561). Under such conditions, the process of conservation may require additional costs that can be reflected in sub-account 977 “Other operating expenses”.
Regulation No. 1183 has only a recommendatory nature for most companies. Its requirements are mandatory only for those companies that are of strategic importance for the state’s economy and security, as well as state-owned enterprises (except enterprises, institutions of the State criminal-executive service).
Commercial companies are not obliged to preserve FA, which are temporarily not involved in the work. Therefore, if depreciation is not accrued to preserved objects of FA, the company has a right to accrue the depreciation on not preserved objects even during their idle hours. Thus, there are no restrictions on this in Accounting Standards 7. If an object is temporarily not used, but the company plans to renew its work after a certain time, such an object of FA, taking into account the requirements of Accounting Standards 7, is recognized as an asset, and therefore there are no grounds for not deprecating it.
Non-decommissioned FA continue to be depreciated as a general rule.
In addition, the rules of Accounting Standards do not contain any reasons not to reflect in the accounting the costs of the current repair and maintenance of such FA. And according to the general rules, the maintenance costs of FA in working condition are not capitalized, but included in the expenses of the reporting period in which they were performed (para. 15 of Accounting Standards 7, para. 7 of Accounting Standards 16 “Expenses”).
In addition, operations related to the repair and maintenance of such FA, do not go beyond the business activities of the company. In this case, the company registered by the value added tax payer (hereinafter − VAT) should not additionally accrue VAT liabilities as required by para. 198.5 of the Tax Code of Ukraine (hereinafter − TCU) in the case of non-commercial use of goods, services and non-current assets, during the acquisition of which amounts of VAT were included in the tax credit.
However, caution: it is better for punctual payers to act immediately in accordance with the rules set out in Regulation No. 1183.
