We continue the series of advice from U-LEAD experts Iryna Drozd and Tetiana Larikova.
To find out when a centralised accounting system should be created and how to organise it best, click here.
If you are interested in recommendations for municipality institutions on the specifics of fixed asset accounting, please visit this link.
The experts also talked about the specific aspects of accounting and stock assessment in budget institutions.
Landscaping in settlements or budget institutions is one of the mandatory and extremely important tasks of local self-government bodies, because green spaces ensure a good quality of life and stay for people, lower air temperature, prevent flooding and contribute to the reduction of air pollutants. U-LEAD experts Iryna Drozd and Tetiana Larikova offered a number of recommendations to budget institutions regarding the initial accounting of green plantings.
The general guidelines for landscaping, care and protection of green spaces in cities, towns and villages are set forth in Clause 5.5 of the Rules for Maintaining Green Plantings in Populated Areas of Ukraine approved by the Order of the Ministry of Construction of Ukraine No. 105 dated 10 April 2006, which states that a legal entity is responsible for maintaining green plantings and their proper care on its site and adjacent areas.
If there are green plantings on the site of the local self-government body or other budgetary institution, it must be recognised. A budgetary institution can also purchase green plantings and officially recognise them.
When purchasing green plantings, divide them into the following types from the start:
- seedlings,
- young plants,
- fully developed plants.
Seedlings of trees and bushes up to one-year-old by the time of their planting should be recorded as part of stocks on Sub-Account 1517 (Raw Materials and Consumables) in accordance with the Procedure for the Implementation of the Chart of Accounts in the Public Sector approved by Order of the Ministry of Finance No. 1219 dated 29 December 2015 (hereinafter the Procedure 1219).
Upon planting, their value is attributed to capital investments and forms the initial value of green plantings.
According to Clause 3.1.7 of the National Regulation (Standard) of Accounting in the Public Sector NP(S)BODS 121 (Fixed Assets) approved by Order of the Ministry of Finance No. 1202 dated 12 October 2010, green perennial plants attributed to fixed assets. Furthermore, para. 42 of Clause 1.1 of Section II of Guideline 11 determines the composition of the Perennial Plantings subgroup. Among other plantings, it includes:
- Artificial perennial plantings regardless of their age;
- Plantings of all kinds (trees and bushes), landscaping and decorative plantings on streets, squares, parks, gardens, green spaces, on sites of institutions, in the yards of residential buildings, hedges, snow protection and field protection forest strips, plantings for sand and river bank stabilisation, ravine-gully plantings, etc.;
- Artificial plantings of botanical gardens and other research and educational institutions for academic purposes and other artificial perennial plantings.
The unit of accounting for green plantings can be both individual trees, bushes, etc. (in pcs) and groups of plantings (“Apple Orchard”, “Linden Alley”, etc. in units of area). The unit of accounting for green plantings must be specified in the Regulation on Accounting Policy.
The initial cost of green plantings includes all costs that are directly related to bringing green plantings to a condition suitable for their intended use (Clause 3 of Section III of NP(S)BODS 121) in accordance with general practice using a straight-line method.
The initial cost of the green planting item can be formed both using capital costs and current costs in accordance with the economic classification of budget expenditures (para. 10 of Clause 3 of Section III of Guideline 11).
For the initial recognition of green plantings, it is necessary to establish compliance with the criteria for recognising fixed assets, namely:
- Its use might yield future economic benefits;
- It has the capacity to be useful to society;
- The cost of the fixed asset can be determined;
- Useful life of more than one year.
In accordance with Procedure 1219 and the Chart of Accounts in the Public Sector approved by Order of the Ministry of Finance No. 1203 dated 31 December 2013 (Chart of Accounts 1203), Sub-Account 1017 (Animals and Perennial Plantings) is designated for the accounting of green plantings, including long-term biological assets and fruit-bearing plants not related to agricultural activity.
Young plants of all types should be accounted for separately from fully developed plants (Clause 1.1 of Section II of Guideline 11) subject to the opening of analytical accounts.
The Regulation on Accounting Policy should specify the first bearing age and the operational age (for reference, see Letter of the State Committee of Ukraine on Horticulture, Viticulture and Wine-Making Industry (DerzhSadVynProm) No. 11/02-460 dated 24 February 1997). Typical useful lives of perennial plantings by their types are given in Clause 6 of Annex 1 to the Guidelines on the Accounting Policy of Public Sector Entities approved by Order No. 11 of the Ministry of Finance dated 23 January 2015.
Accountants sometimes classify green plantings as low-value non-current tangible assets, which are not attributed to fixed assets based on the cost criterion, but this is a mistake. This case calls for the priority of substance over form (Article 4 of Law of Ukraine No. 996-XIV “On Accounting and Financial Reporting in Ukraine” dated 16 July 1999), a principle stating that economic transactions should be reflected in accounting and financial reporting in accordance with their essence rather than based solely on the legal form.
If a mistake has been made, correct it on the basis of the accounting certificate by making a reversal entry (Clause 4.3 of the Regulation on Documentary Support of Accounting Records approved by Order of the Ministry of Finance No. 88 dated 24 May 1995).
Young green plantings, which are yet to reach their operational age, are not subject to depreciation (para. 2 of Section IV of NP(S)BODS 121). Once they are fully developed, depreciation must be calculated on a general basis using the straight-line method.
Information about the initial and liquidation value of green plantings and the period of their useful life are reflected in the Inventory Card for Accounting of Animals and Perennial Plantings executed according to the form approved by Order of the Ministry of Finance “On Approval of Standard Forms for Accounting and Write-Off of Fixed Assets by Public Sector Entities and Their Preparation Procedure” No. 818 dated 13 September 2016.
The Inventory Card should indicate the species of plantings, the number of planted units, the area planted, the date of planting, etc. This Card is opened by the accounting service in one copy per accounting unit.