PROBLEMS OF IDENTIFICATION AND METHODS FOR DETERMINING THE ACCOUNTING ESTIMATES

ABSTRACT

The article identifies accounting estimates employed by Russian and international practices. The Russian and international accounting and audit standards containing the definition of this notion were discussed. Highlighted issues that need to be addressed. Problematic issues of the identification and determining the accounting estimates were outlined. Problems of methods for determining the accounting estimates were discussed as well as calculation methods were proposed.

Keywords: accounting estimates; the method of determining the accounting estimates; estimated liabilities.

To date, the concept of accounting estimates is given, both in Russian practice and in international practice. PBU 8/2010 "Estimated liabilities, contingent liabilities and contingent assets" defines the concept of estimated liabilities. An estimated liability is an entity's obligation with an indefinite amount and / or term of execution. PBU 21/2008 "Changes in accounting estimates" defines the accounting estimate through a list of types.

The accounting estimate is the amount of the provision for doubtful debts, the provision for inventory depreciation, other estimated provisions, the useful life of fixed assets, intangible assets and other amortised assets, the estimated expected return of future economic benefits from the use of amortised assets, etc.

If a change in accounting data cannot be unambiguously classified as a change in accounting policy or a change in an accounting estimate, then for the purposes of accounting (financial) reporting, it is recognized as a change in an accounting estimate.

Based on the definition of accounting estimates given in PBU 21/2008 and current practice, we can distinguish the following types of accounting estimates in accounting:

• the allowance for doubtful debts;
• provision for inventory depreciation;
• provision for depreciation on investments;
• provision for vacation pay;
• provision for repair of fixed assets;
• useful lives of fixed assets, intangible assets and other depreciable assets;
• estimation of the expected return of future economic benefits from the use of amortised assets.

In international practice, the concept of accounting estimates is defined in International standard on auditing (ISA) 540 " Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures", as well as in IAS 37 " Provisions, contingent liabilities and contingent assets".

For the purposes of this International standard, an accounting estimate is an approximate value of a monetary value in the absence of precise methods for calculating it. IAS 37 defines an estimated liability as a liability with an indefinite maturity or an indefinite amount. The problem of identifying accounting estimates is that there is no definition of accounting estimates as a separate category and there is a convergence of concepts such as estimated liability and accounting estimate.

If we consider the methodology for determining the value of accounting estimates, we may encounter the problem that there are no legally established methods for determining the value of accounting estimates. In practice, the value of the accounting estimates is calculated independently by each organization, depending on the calculation method chosen by them.

Based on the established practice in this article I would like to give some methods for calculating the value of these accounting estimates:

1. A Allowance for doubtful accounts is a type of allowance that an organization must create if it has a large receivable that has problems with recovery.

This allowance should be determined by the organization for each liability separately. That is, for each debt, contract, for which the organization believes that the risk of non-repayment is high or there is already overdue debt.

This type of receivables must be confirmed by conducting an inventory of settlements. Thus, the accounting Department needs to confirm the obligations by reconciliation of mutual settlements.

2. Provision for inventory depreciation

The provision is formed by the amount of the difference between the current market value and the actual cost of inventory. Thus, when a provision for impairment of inventories recognized other expense (paragraph 20 of the guidelines, paragraph 11, 16 of the Regulations on accounting "Costs organization" PBU 10/99, approved by Order of the Ministry of Finance of Russia from 06.05.1999 N 33h).

3. Useful lives of fixed assets and intangible assets

The organization independently determines the useful life until the object is accepted for accounting in accordance with paragraph 20 of PBU 6/01 and paragraph 59 of the Guidelines, based on:

•  the expected life of this facility in accordance with the expected capacity or capacity;
• expected physical wear and tear, depending on the operating mode (number of shifts), natural conditions and the influence of aggressive environment, repair system;
• legal and other restrictions on the use of this property (for example, the lease term).

These parameters for determining the useful life are not constant and may change depending on new circumstances.

4. Provision for vacation pay

When creating a provision for vacation pay, there is almost a consensus-it is proposed to determine the number of days of unused vacation for all employees and the average salary, which allows you to calculate the amount of vacation payments at the reporting date. This approach is the basis of methods for calculating the amount of the obligation to pay for vacation.

For example, starting with monthly reservations and ending with methods of convergence of tax and accounting reserves for vacations. When using automated accounting and tax accounting systems, such calculations are possible. Practitioners who tend to minimize the differences between accounting and tax accounting, put forward ideas for applying the procedure for creating and determining the amount of an estimated obligation to pay vacation pay in the same way as tax rules.

Some articles justify the creation of vacation payment obligations based on the inventory of the organization's vacation debts. Based on its results, the amount of overdue payments for the current period is determined, which is carried forward to the future, which is quite consistent with IFRS.

5. Provision for depreciation on investments

A depreciation on investments is a sustained significant decrease in the value of financial investments that do not have their current market value determined, below the amount of economic benefits that the company expects to receive from these financial investments in the normal course of business.

The accounting value of financial investments is the cost of financial investments, which they are reflected in accounting.

References:

1. Federal law No. 402-FZ of 06.12.2011 (ed. of 29.07.2018) "on accounting"// SPS ConsultantPlus.
2. Federal law No. 307-FZ of 30.12.2008 (as amended on 23.04.2018)" on audit activities " // SPS ConsultantPlus.
3. Order of the Ministry of Finance of the Russian Federation from 31.10.2000 No. 94n (ed. from 08.11.2010)" on approval of the accounting Plan of financial and economic activities of organizations and Instructions for its application " // SPS ConsultantPlus.
4. Order of the Ministry of Finance of the Russian Federation dated 13.12.2010 No. 167n (ed. from 06.04.2015) "on approval of the accounting Regulations" Estimated liabilities, contingent liabilities and contingent assets" (PBU 8/2010) " / / SPS ConsultantPlus.