We continue the series of advice from U-LEAD experts Iryna Drozd and Tetiana Larikova.
Read the previous article on this topic with the recommendations to budget institutions regarding the initial recognition of green spaces here.
Click here to find out when a centralised accounting system should be created and how to organise it best.
If you are interested in recommendations for municipality institutions on the specifics of fixed asset accounting, please visit here.
The experts also discussed the specific accounting and stock assessment aspects in budget institutions.
Institutions (asset holders) must provide upkeep, maintain and restore green plantings, reconstruct them and ensure ongoing and major repairs in accordance with 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 (hereinafter Rules 105).
Green plantings should be inspected and assessed on the balance sheet date or as needed by the commission of the institution, the members of which are approved by the order of the head.
To identify the need for the renewal of green plantings, the commission of the institution must conduct a technical inventory and execute the findings as a Record. The findings of the inventory must be recorded in the Certificate of the Green Planting on the Balance Sheet of the Institution (Clause 1.6 of the Guidelines for the Technical Inventory of Green Plantings in Cities and Towns of Ukraine approved by Order of the State Committee for Construction, Architecture and Housing Policy of Ukraine No. 226 dated 24 December 2001).
According to Clause 3 of Article 20 of the Law of Ukraine “On Improvement of Settlements” No. 2807-IV dated 6 September 2005, maintenance and repair of landscaping elements of a budget institution shall be at the expense of budget allocations received from local budgets.
Expenses for maintaining green plantings (care, protection from pests, cleaning, etc.) are recognised as expenses of the reporting period in which they were incurred. The following expenses are recorded on Sub-Accounts 8013 (8113) “Financial Expenses” 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).
Landscaping is qualified as ongoing and major repairs, reconstruction or modernisation (improvement).
Expenses for the ongoing repair of green plantings (strengthening, prevention of small deformations, damage, etc.) are recognised as financial expenses of the reporting period in which they were incurred.
Expenses for major repairs, including the improvement of green plantings (landscaping facility of the green economy) include the costs of works aimed at restoring and improving their operational characteristics, the quality of landscaping in accordance with the Procedure for Repairs and Maintenance of Settlement Landscaping Facilities: Order of the State Committee of Ukraine on Housing and Utility Services No. 154 dated 23 September 2003.
Expenses for the major repair of green plantings are recognised as financial expenses of the reporting period in which they were incurred.
Expenses for the improvement of green plantings increase their original cost, provided that the institution will, through the use of the improved green plantings, further receive higher economic benefits/greater utility capacity than those determined at the time of initial recognition (National Regulation (Standard) of Accounting in the Public Sector NP(C)BODS 121; Guidelines on Accounting of Green Plantings).
The initial cost of green plantings should be increased by the cost of the works:
- For the green plantings, which have been improved, if they are accounted for as separate fixed assets;
- For buildings/structures on the territory adjacent to the site of these green plantings, provided that the green plantings are part of the complex and their initial value contributes to the initial value of the building/structure.
The head of the institution approves a decision on the nature and features of the repairs carried out by the institution, taking into account the findings of the situational analysis and assessment of the costs.
Costs incurred for improvements that increase the original value of the green planting are included in capital investments and recorded under Sub-Account 1311 “Capital Investments in Fixed Assets” in accordance with Order No. 1219 subject to opening an analytical account thereunder.
Following the repair of the green plantings, standard forms must be drawn up. You can use the forms approved by Order of the Ministry of Finance No. 818 dated 13 September 2016, adapting them to green plantings, namely:
- Certificate of Transfer for Repair, Reconstruction and Modernisation of Fixed Assets (green plantings);
- Acceptance Certificate for Repaired, Reconstructed and Modernised Fixed Assets (green plantings).
Once repairs related to the improvement of green plantings are completed, the commission of the institution should review the useful life and liquidation value of the improved facility and change them to account for the changes in the expected economic benefits from its use.
Depreciation of green plantings is calculated taking into account the new period of useful use and liquidation value, starting from the month following the month of change of the period of useful use and/or liquidation value.
Based on the results, make changes to the Inventory Card of the Fixed Asset (green planting) in terms of changing the technical and operational characteristics of the facility of the green economy.
Accounting of the liquidation of green plantings in budget institutions
Many green plantings were ruined and destroyed due to the war. Among other things, in the process of operation, green areas reach the end of their life cycle. For instance, trees can be affected by fungal disease of timber, dry out or create emergencies or hazardous conditions for the public and are therefore subject to liquidation.
Clause 2 of Article 16(1) of the Law of Ukraine “On Improvement of Settlements” No. 2807-IV dated 6 September 2005 prohibits arbitrarily destroying trees, bushes, etc., on any landscaping facilities.
Any trees, bushes, lawns and flower beds must be removed in accordance with the Procedure for Issuing a Permit for the removal of Trees, Bushes, Lawns and Flower Beds in Populated Areas adopted by Decree of the Cabinet of Ministers No. 1045 dated 1 August 2006.
Documents authorising preparatory and construction works, obtained in accordance with the Law of Ukraine No. 3038-VI “On Regulation of Urban Development” dated 17 February 2011 (hereinafter Law of Ukraine No. 3038-VI), are required for the removal of green plantings after the inspection of the plot of land and drawing up a Certificate of Inspection of Green Plantings To Be Removed.
Green plantings can be removed in the following cases:
- Preparatory and construction works on sites in accordance with Articles 35 to 37 of the Law of Ukraine No. 3038-VI;
- Demolition of emergency, dead and diseased trees, as well as self-seeding and sprouting trees with a root neck diameter of up to 5 cm;
- Emergency response on the utility lines of the settlement;
- Restoration of the light conditions in the residential premises shaded by trees;
- Repairs and maintenance work in the protection zone of overhead power lines, at the transformer substation and distribution point of the power supply system, water, heat supply and drainage lines, telecommunications and electric grid cables;
- End of the life cycle of the tree;
- Commercial cultivation of decorative trees and bushes in nurseries;
- Elimination of the effects of a natural disaster, accident and emergency response.
Green plantings are liquidated by the decision of the executive body of the village, settlement, city council (Clause 3(1) of Order No. 1045). Trees are removed under a permit — a Warrant for the Removal of Green Plantings.
The exception is self-seeding plantings in the protection zones of overhead and cable lines, transformer substations, distribution points and devices (Article 28(1) of Law No. 2807). They can be removed without any approval from the competent authority.
To determine whether to liquidate green plantings, a commission is created by order of the head to:
- directly inspect the planting to be liquidated;
- establish the reasons for non-compliance with the asset recognition criteria;
- determine the procedure for further accounting of the timber after the liquidation of the green planting;
- draw up and sign the green planting write-off certificate.
As for the document, the commission must draw up a record or opinion following the inspections of green plantings; the work must be carried out immediately, especially if there is a threat to the lives of people.
Green plantings can be accounted for as a separate fixed asset (Sub-Account 017 “Animals and Perennial Plantings”). In this case, they are written off according to general rules; the initial value of green plantings and the amount of wear and tear are written off (Section VI of NP(S)BODS 121).
The commission of the institution draws up the Certificate of Write-Off of Fixed Assets (Green Plantings) according to Order of the Ministry of Finance No. 818 dated 13 September 2016.
In the case of the removal of green plantings from a land plot, incurred costs are recognised as financial expenses of the corresponding reporting period (Clause 2 of Section III of NP(S)BO 121).
Any timber obtained after the removal of green plantings must be officially recognised:
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For further use for the needs of the institution (Clause 5(1) of Section VI of NP(S)BODS 121) depending on the planned directions of its use. The timber obtained is accounted for under the following Sub-Accounts: 1513 (Building Materials) as building materials for ongoing repairs; 1514 (Fuels and Lubricants) as materials for heating; 1517 (Raw Materials) as raw materials for in-house processing.
Prior to or on the last working day of the reporting month, a Certificate of Receipt in Kind must be drawn up and submitted to the Treasury for the amount of officially recognised timber that was left for the needs of the institution.
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For further sale, the timber that the institution plans to sell or transfer (as firewood, raw materials for processing, etc.) is recorded under Sub-Account 1815 (Assets for Distribution, Transfer, Sale).
Any actual income from the sale of the timber must be reflected as changes to the estimate under the special fund.