Reflection in accounting for the modernization of a fully depreciated fixed asset item (FPE)

Accounting

A fully depreciated asset actually used in production continues to be listed in accounting (as follows from paragraph 2 of clause 29 of the Accounting Regulations “Accounting for Fixed Assets” PBU 6/01, approved by Order of the Ministry of Finance of Russia dated March 30, 2001 N 26n) .

Costs incurred in connection with the modernization of an OS asset, as a result of which the initially adopted standard indicators of its functioning (useful life, power, quality of use, etc.) are improved (increased), increase the initial cost of the OS asset (as follows from paragraph. clauses 14, 26, 27 PBU 6/01).

Accounting for modernization costs is carried out in the manner established for accounting for capital investments (clause 70 of the Guidelines for the accounting of fixed assets, approved by Order of the Ministry of Finance of Russia dated October 13, 2003 N 91n (hereinafter referred to as the Guidelines)).

In this case, upon completion of the modernization of the OS object, the organization on the basis of paragraph. 6 clause 20 of PBU 6/01 revised and increased its useful life. Since the fixed asset is fully depreciated, that is, its previously established useful life expired before the modernization, the new useful life is 12 months.

The cost of an asset is repaid by calculating depreciation (clause 17 of PBU 6/01). With the linear method, the annual amount of depreciation is determined based on the original cost or current (replacement) cost (in case of revaluation) of the fixed asset and the depreciation rate calculated based on the useful life of this object (paragraph 2 of clause 19 of PBU 6/01) . During the reporting year, depreciation charges for fixed assets are accrued monthly, regardless of the accrual method used, in the amount of 1/12 of the annual amount (paragraph 5 of clause 19 of PBU 6/01).

The amount of monthly depreciation charges for a modernized fixed asset is calculated based on its residual value (which is zero, since the fixed asset was completely depreciated), increased by the amount of modernization costs, and the new useful life of the fixed asset (paragraph 2 of clause 60 of the Guidelines ).

Depreciation for a modernized fixed asset is accrued starting from the month following the month of completion of work on modernizing the fixed asset (which, in our opinion, follows from clause 21 of PBU 6/01).

Due to the fact that the fixed asset is used for the production of products, the amounts of monthly depreciation accrued on it are related to expenses for ordinary activities and participate in the formation of the actual cost of finished products (clauses 5, 9, 16 of the Accounting Regulations “Expenses of the organization » PBU 10/99, approved by Order of the Ministry of Finance of Russia dated May 6, 1999 N 33n).

Accounting records for the transactions under consideration are made in accordance with the Instructions for the application of the Chart of Accounts for accounting the financial and economic activities of organizations, approved by Order of the Ministry of Finance of Russia dated October 31, 2000 N 94n, taking into account clause 42 of the Methodological Instructions and are shown below in the table of transactions.

Position of the Ministry of Finance

According to the official position of the Ministry of Finance, the costs of upgrading the OS, which has been fully depreciated and the residual value of which is zero, increase the initial price of the OS. In this case, to calculate depreciation, the same rate is applied that was initially established when the fixed asset was put into operation. The department recalled this in a letter dated July 25, 2021 No. 03-03-06/1/43374. This position has been unchanged for several years (letters of the Ministry of Finance of Russia dated March 25, 2015 No. 03-03-06/1/16234, dated April 5, 2012 No. 03-03-06/1/181, dated November 3, 2011 No. 03-03-06/1/714, dated September 23, 2011 No. 03-03-06/2/146, dated December 27, 2010 No. 03-03-06/1/813, dated September 10, 2009 No. 03-03-06/2/167). The new SPI of the modernized facility is not taken into account by the regulatory authorities. For example, if the rate was two percent per month, then modernization costs are amortized within the same limits. A constant depreciation rate is a universal answer from officials to all questions related to updating the OS. For example, it does not matter to auditors whether, as a result of investments, the useful life of the object has increased (letter dated November 18, 2013 No. 03-03-06/4/49459, dated February 11, 2014 No. 03-03-06/1/5446) .

Value added tax (VAT)

The organization has the right to deduct the amount of VAT presented by the contractor when carrying out work to modernize an OS facility if there is an invoice issued by the contractor and drawn up in accordance with the requirements of the law, and relevant primary documents after taking into account the results of the work performed, provided that the modernized the fixed asset will be used when carrying out transactions subject to VAT (clause 1, clause 2, article 171, clause 1, article 172, clause 2, article 169 of the Tax Code of the Russian Federation).

Depreciation calculation after modernization:

example of calculating depreciation for a fully depreciated object

In 2021, the company completed the modernization of the production line belonging to the 4th depreciation group with SPI from 5 to 7 years. Substation lines upon commissioning (January 2010) – 500,000 rubles. The SPI was set at 80 months. Depreciation rate (RA) – 1.25% (1/80 month). Depreciation was calculated from February 2010 to September 2021, and at the end of 2021, when it was decided to reconstruct the line, the facility was fully depreciated. In March 2021, the corresponding work was completed, the amount of reconstruction without VAT amounted to 350,000 rubles. From April 2021, the company begins to write off modernization costs, using the mechanism for calculating depreciation as follows:

C after modernization is 850,000 rubles. (500,000 + 350,000). The NA should be the same as at the time the line was entered, i.e. 1.25%. Consequently, the amount of monthly depreciation will be 10,625 rubles. (RUB 850,000 x 1.25/100). The costs of the completed modernization should be written off over 32 months at 10,625 rubles. (340,000 rubles), in the 33rd month the amount of depreciation will be 10,000 rubles.

Corporate income tax

When modernizing an asset (including a fully depreciated one), its initial cost is increased (clause 2 of Article 257 of the Tax Code of the Russian Federation, Letter of the Ministry of Finance of Russia dated July 25, 2016 N 03-03-06/1/43374). The initial cost of the modernized OS object will be 720,000 rubles. (576,000 rub. + 172,800 rub. - 28,800 rub.).

In the situation under consideration, after modernization, the useful life of an asset has increased, and therefore the organization has the right to increase the useful life of this object in tax accounting, on the basis of which depreciation is calculated, but within the period established for the depreciation group in which this item is included OS object (Clause 1, Article 258 of the Tax Code of the Russian Federation).

In accordance with the Classification of fixed assets included in depreciation groups, approved by Decree of the Government of the Russian Federation dated January 1, 2002 N 1, equipment is classified in the third depreciation group (property with a useful life of over three years to five years inclusive), its useful life was established equal to 48 months (clause 1 of article 258 of the Tax Code of the Russian Federation). After modernization, the useful life increased by 12 months, therefore, the organization has the right to set a new useful life of 60 months (48 months + 12 months).

Depreciation after modernization of an asset is calculated based on the increased initial cost of the asset and its extended (new) useful life. Similar explanations are given in Letter of the Ministry of Finance of Russia dated 08/04/2016 N 03-03-06/1/45862.

With this approach, the amount of depreciation on the modernized fixed asset, monthly included in the costs associated with production and sales, starting from the month following the month of completion of the modernization of the fixed asset, will be 12,000 rubles. (RUB 720,000 / 60 months x 100%) (clause 3, clause 2, article 253, clause 4, article 259, clause 2, article 259.1, clause 3, article 272 of the Tax Code of the Russian Federation). Thus, after 12 months following the month of completion of modernization, the asset will be fully depreciated in tax accounting (576,000 rubles + 12,000 rubles x 12 months = 720,000 rubles).

Note that there are also other points of view on the issue of calculating depreciation on modernized fixed assets. Detailed information on positions on this issue is provided in the Encyclopedia of Disputes on Income Tax.

The amounts of accrued depreciation on a fixed asset, in accordance with the accounting policy, relate to direct expenses, which meets the requirements of paragraphs. 1, para. 8, 10 p. 1 art. 318 Tax Code of the Russian Federation. Direct expenses relate to the expenses of the current reporting (tax) period as products are sold, in the cost of which they are taken into account in accordance with Art. 319 of the Tax Code of the Russian Federation (clause 2 of Article 318 of the Tax Code of the Russian Federation).

Documentary evidence of OS upgrade

The fact of modernization must be confirmed. Work on updating the OS can be carried out either with the involvement of third-party organizations or by the company’s own resources. In the first case, documentary evidence of the costs incurred will be a bilateral acceptance certificate signed by the contractor. When upgrading the operating system on your own, supporting documents will include invoice requirements for the transfer of materials to the relevant department, write-off acts, work orders. In this case, upon completion of the work, the company must draw up an acceptance certificate (in one copy), which indicates the full cost of the work performed and the date of completion. After the upgrade, the information is entered into the OS inventory card. If the asset is fully depreciated, its residual value is zero. In this case, the initial price of the object increases by the amount of modernization costs (clause 2 of Article 257 of the Tax Code of the Russian Federation). Renewal costs should also be written off through depreciation.

Account correspondence

Table of accounting entries

Judges' opinion

Moreover, the above opinion is also supported by some arbitrators. Thus, in the Resolution of the Federal Antimonopoly Service of the Moscow Region dated April 23, 2012 in case No. A40-24244/11-75-102, the court indicated that if the useful life of an asset has expired, but the taxpayer nevertheless modernized it, then when determining the amount of depreciation, that the same standard that was established when the OS was put into operation. A similar conclusion was made by the Federal Antimonopoly Service of the Eastern Military District dated February 17, 2011 in case No. A29-6272/2007.

But the courts also have a different position, according to which, after modernization, it is necessary to calculate a new monthly depreciation rate for fixed assets, dividing the amount of “modernization” costs and the residual value of the object: if the SPI has not increased, by the remaining SPI, or if the SPI has increased, by the remaining SPI plus the period, which was added thanks to an OS update.

note

10 – 30% is the amount of the depreciation bonus on the cost of the fixed assets.

In the Resolution of the Arbitration Court of the East Siberian District dated June 17, 2021 No. F02-1892/2016, the court concluded that the organization lawfully determined the useful life of a fully depreciated OS after its modernization. The arbitrators rejected the argument of the Federal Tax Service that it was necessary to use the SPI established for the OS when it was put into operation. Similar conclusions were made in the Resolutions of the Arbitration Court of the West Siberian District dated September 1, 2021 No. F04-3528/2016, and the Arbitration Court of the Volga District dated January 22, 2021 No. F06-4506/2015. According to the courts, if by the time the modernization began the OS was completely depreciated, it is acceptable that the corresponding work could lead to the creation of a new OS object with a new SPI, which does not necessarily have to be the same as the old one. The main thing is that the new SPI corresponds to the depreciation group of the OS. Such conclusions were made in the decisions of the Arbitration Court of the North Caucasus District dated August 9, 2021 No. F08-5364/2016, the Arbitration Court of the Moscow District dated December 15, 2015 No. F05-17417/2015, the Arbitration Court of the Volga District dated February 8, 2021 No. F06 -5004/2015, FAS PO dated February 12, 2013 in case No. A12-8247/2012.

Read also “New classification of fixed assets from 2021”

How to account for fully depreciated fixed assets

In practice, there are often cases when the initial book value of a fixed asset is completely repaid by depreciation, but the fixed asset itself continues to be used and participates in generating the enterprise’s income.
Find out how to calculate the book value of an enterprise from the article “The book value of fixed assets is...”.

According to the rules of PBU 6/01, it is possible to write off an asset from accounting only if it is disposed of or loses its ability to generate income. If the OS continues to be used, it should continue to be taken into account for accounting purposes and, if necessary, disclose information about it in the financial statements.

From 2022, PBU 6/01 will no longer be in force. Instead, FSBU 6/2020 will apply. The organization has the right to begin applying the standard earlier.

ConsultantPlus experts explained in detail how to properly keep records according to the new standard. Get free demo access to K+ and go to the Review Material to find out all the details of this procedure.

Why a certificate of the book value of an organization’s assets is issued, see this material.

Tax authorities adhere to a similar point of view on this issue: if 100% of depreciation has been absorbed for a fixed asset, but it is still in use, it must continue to be taken into account (letter of the Federal Tax Service of Russia dated December 8, 2010 No. 3-3-05/128).

In this case, the residual value of the fixed assets, reflected in the balance sheet and defined as the difference between the initial cost (Dt 01) and depreciation (Kt 02), will be equal to 0.

For more details, see the article “Reflecting fixed assets in the balance sheet” .

Two OS objects in one

Cases of re-registration of ownership, when separate ownership rights to premises within one building are registered, are not listed in paragraph 2 of Art. 257 of the Tax Code of the Russian Federation. How to determine the initial cost and at what rates should depreciation be calculated in this case? The Ministry of Finance of Russia in Letter dated October 6, 2011 N 03-03-06/1/632 explains that the cost of premises for which ownership rights are registered in exchange for ownership of the entire building is determined based on the original cost of this building and the share of the area of ​​newly registered buildings. In this case, the amount of depreciation accrued for this object is excluded from the initial cost of newly registered buildings in appropriate amounts calculated in proportion to their area. As for the useful life of the new premises, it remains the same, that is, the period established for the building before the re-registration of ownership is accepted.

Step-by-step instruction

The Organization has a multifunctional woodworking machine on its balance sheet. To increase output, it was decided to modernize the machine - install a more powerful engine.

On May 18, the Organization purchased an engine for modernization of the machine at a price of 36,000 rubles. (including VAT 20%). On the same day, the engine was handed over to the contractor for installation.

On May 22, the Organization received a certificate of completion from the contractor in the amount of 6,000 rubles. (without VAT).

On May 23, the cost of the machine was increased by the cost of the engine and installation work. As a result of modernization, the useful life of the machine has been increased by 8 months in used and controlled units.

On June 30, depreciation of the machine was accrued taking into account the new SPI and the increased cost.

Initial information:

• the initial cost of the machine is 300,000 rubles;
• initial SPI in BU and NU - 48 months;
• depreciation is calculated using the straight-line method in accounting and accounting records;
• depreciation premium has not been established.

Let's look at step-by-step instructions for creating an example. PDF

Reflection in accounting of work performed by the contractor

Document the receipt of work from the contractor using the document Receipt (act, invoice) transaction type Services (act) in the Purchases - Receipts (acts, invoice) section.

Please indicate:

• Nomenclature - name of the work, selected from the Nomenclature directory;
• Accounting accounts : Cost account - 08.03 “Construction of fixed assets”;
• Construction object - the name of the modernization object, where all modernization costs are collected (in our example - Multifunctional machine );
• Cost items - the same item as for spare parts, selected from the Cost Items directory;
• Construction methods - Contract (indicated even when modernizing on your own, the economic method is indicated only for construction and installation work, when it is necessary to charge VAT);
• VAT account - 19.04 “VAT on purchased services” (in our example - work without VAT).

Postings according to the document

The document generates the posting:

• Dt 08.03 Kt 60.01 - the cost of work is taken into account when determining the costs of modernization.

Transfer of spare parts for installation

Reflect the transfer of the engine for installation in the document Requirement-invoice , creating it based on the document Receipt (act, invoice) (or in the section Warehouse - Requirements-invoice - Create button).

The document will be filled in automatically according to the document Receipt (act, invoice) . Check that the fields are filled in:

Document header

• Warehouse - a warehouse from which spare parts are transferred.

Tabular part of the document

Materials tab :

• Nomenclature - transferred spare parts, selected from the Nomenclature directory;
• Accounting account - 10.05 “Spare parts”.

Cost Account tab :

• Cost account - 08.03 “Construction of fixed assets”;
• Construction object - the name of the modernization object where modernization costs are collected (in our example - Multifunctional machine );
• Cost items - OS modernization , selected from the Cost Items directory: Type of expense - a suitable type of expense, which provides for reflection in the NU (in our example - Other expenses ).

The selected item will affect the fact of recognition of expenses in NU when they are subsequently written off through depreciation, and is also needed for internal analytics.

• Methods of construction - Contract (indicated even when modernizing on your own, the economic method is indicated only for construction and installation work, when it is necessary to charge VAT).

Postings according to the document

The document generates the posting:

• Dt 08.03 Kt 10.05 - the cost of spare parts is taken into account when determining the costs of modernization.

Including the cost of work and spare parts in the cost of the OS

When the modernization work is completed, fill out the OS Modernization (section OS and intangible assets - OS Modernization).

Let's look at filling out the document using an example.

Document header

• The location of the fixed asset is the division in which the fixed asset being modernized is listed;
• OS event - Upgrade , is indicated automatically.

Construction object tab :

• Construction object - the name of the modernization object, where all modernization costs are collected (in our example - Multifunctional machine );
• Account - 08.03 “Construction of fixed assets”.

Calculate amounts button, the following fields will be automatically filled in with account balances on 08.03:

• Cost - the amount of costs for modernization in a used unit (in our example - 36,000 rubles),
• The cost of the NU is the amount of costs for modernization in the NU (in our example - 36,000 rubles).

Let's check the calculation performed by the program:

• engine cost - 30,000 rubles;
• the cost of installation work is 6,000 rubles. 30,000 + 6,000 = 36,000 rub.

The calculation was done correctly.

Fixed assets tab :

• Fixed asset - the fixed asset being modernized, selected from the Fixed Assets a;
• Amount - filled in automatically by clicking the Distribute ;
• Expiration date — the original SPI is set by default, manually set the useful life taking into account the change (in our example: 48 + 8 = 56 months).

Postings according to the document

The document generates the posting:

• Dt 01.01 Kt 08.03 - modernization costs are included in the cost of the fixed asset.