ORDER OF THE MINISTRY OF FINANCE OF THE REPUBLIC OF MOLDOVA

of December 25, 1997 No. 174

About approval and enforcement of National accounting standards and the Chart of accounts of financial accounting of financial and economic activities of the companies

In pursuance of provisions of the Order of the Government of the Republic of Moldova No. 710 of September 23, 1994 "About the State program of transition of the Republic of Moldova to the international system of financial accounting and statistics" and based on the Law on financial accounting No. 426-XIII of April 4, 1995 PRIKAZYVAYU:

1. Approve:

National accounting standards:

NSBU 1 "Accounting policy";

NSBU 2 "Inventory stocks";

NSBU 3 "Structure of costs and expenses of the company";

NSBU 5 "Submission of financial statements";

NSBU 7 "Cash flow statement";

NSBU 12 "Accounting of tax on the income";

NSBU 14 "Financial information on segments";

NSBU 16 "Accounting of non-current tangible assets";

NSBU 18 "Income";

NSBU 23 "Borrowing costs";

NSBU 25 "Accounting of investments";

NSBU 28 "Accounting of investments into associates";

"Conceptual bases of preparation and submission of financial statements";

Chart of accounts of financial accounting of financial and economic activities of the companies;

Technique of transition to new system of accounts of financial accounting.

2. National accounting standards and the Chart of accounts of financial accounting of financial and economic activities of the companies since January 1, 1998 become effective in the territory of the Republic of Moldova (according to Item 1 of this order).

3. Consider invalid regulations of the Ministry of Finance in part which contradicts national accounting standards and the Chart of accounts of financial accounting of financial and economic activities of the companies.

 

NATIONAL ACCOUNTING STANDARD 1

"ACCOUNTING POLICY"

Introduction

1. This standard is developed on the basis of the International accounting standard 1 "Disclosure of accounting policy", accepted by Committee on MSBU in 1974 and reviewed in 1994.

This standard is element of system of normative regulation of financial accounting in the Republic of Moldova and shall be applied taking into account provisions of other national accounting standards (NAS).

Purpose

2. The purpose of this standard consists in establishment of bases of forming of accounting policy and disclosure of its major provisions used in case of creation and submission of financial statements of business entity (further - the companies): balance sheet, reports on financial results, on movement of equity, on cash flow and appendices to them.

 

Coverage

3. This standard extends on all legal entities and physical person which are engaged in business activity and registered in the Republic of Moldova and also to their branches, representations and other structural divisions located both in the territory of Moldova and beyond its limits.

Banks, insurance companies and other financial institutions fulfill requirements of this standard only regarding the provisions which are not provided by NSBU 30 "Disclosures in financial statements of banks and other financial institutions".

 

Determinations

4. In this standard terms with the following content are used:

Accounting policy - set of the principles, bases, rules, methods and methods accepted by management of the company for financial accounting and creation of financial statements;

System of normative regulation accounting uchetasovokupnost legislative and the regulations regulating financial accounting and creation of financial statements;

Financial statements - methods of documentary generalization of information on condition and change of property and financial position, about movement of equity and money of the company for the accounting period;

Users of financial statements - the legal entities and physical persons interested in information on financial and economic activities of the company: investors, creditors (real and potential), buyers, suppliers, employees of the company, tax and administrative authorities, etc.

 

Forming of accounting policy

5. Accounting policy of the company is created by his head according to this standard if other is not established by the current legislation of the Republic of Moldova.

6. Forming of accounting policy is based on the following fundamental assumptions of financial accounting:

a) Continuity

The company is considered as continuously acting i.e. as continuing the activities in the near future. At the same time it is supposed that the company has neither intention, nor need it is essential to reduce or stop the activities.

b) Permanency

The accounting policy chosen by the company is applied by it consistently from one accounting period to another.

c) Charge

Income and expenses are recognized and reflected in financial accounting and financial statements of that period when they took place, irrespective of the actual time of receipt or payment of money. (The conditions influencing process of compliance of the income and expenses on accrual basis are considered in other NSBU).

7. Accounting policy shall provide respect for the following principles:

a) Discretion

On many economic activities different emergence of uncertainty is inevitable. Therefore in case of creation of financial statements it is necessary to show discretion in order that assets and the income were not exaggerated, and obligations and expenses were not underestimated. However discretion does not justify creation of the hidden reserves.

b) Content priority over form

Economic activities and other events shall be considered and provided in financial statements, first of all according to their content and financial reality, and not just according to their legal form.

c) Materiality

In financial statements all Articles rather essential to estimates and adoption of decisions by users shall be opened. If Article (or degree of its accuracy) is not of great importance for users of financial statements, then it is considered insignificant. For example, the published financial statements of large enterprises can be expressed in thousands leu as the insignificant amounts do not influence decision making process.

8. At choice and reasons for accounting policy of the specific company, except the fundamental assumptions and the principles provided by this standard also following factors influence:

a) pattern of ownership and organization-legal status of the company (joint-stock company, state company, sole proprietor company, limited liability company, joint business, etc.);

b) type of activity and sector of economy (industry, agricultural industry, construction, transport, science, etc.);

c) sizes of the companies (production volume, sales volume, personnel number, etc.);

d) the strategy of financial and economic development (the purpose and task of economic development of the company, long-term prospects expected the direction of investments, tactical approaches to the solution of perspective tasks);

e) level of technical equipment of the company, including computerization;

f) personnel - skill level (experience, skills, understanding of tasks and problems, possibility of their decision);

g) economic situation - availability of market infrastructure, financial situation, conditions for investments, etc.

9. Base for forming of accounting policy of the company are national accounting standards which allow alternative methods of assessment and accounting of assets, equity, obligations, income and expenses and results of activities of the company. If certain standard does not establish accounting method on specific question, then the company has the right to develop independently corresponding method according to requirements of the present or other NSBU.

10. The procedure of forming of accounting policy consists in the choice of one method from several offered in each standard, reasons for the chosen method proceeding from features of activities of the company, and its acceptance as basis for financial accounting and creation of financial statements. For example, NSBU 16 "Accounting of non-current tangible assets" allows application of different accrual methods of depreciation of fixed assets: rectilinear write-off, in proportion to the amount of works (products), the decreasing remaining balance, write-off of the worn-out cost on the amount of numbers. When forming accounting policy the company chooses that accrual method of depreciation which more corresponds to expected model of receipt of economic benefits from specific fixed asset object. So, as the car loses bigger percent of cost in the first years of operation, its depreciation can be charged by method of the decreasing remaining balance, but not method of rectilinear write-off by which depreciation of the buildings and other objects which are regularly losing the cost during all useful life is charged.

11. Accounting policy of the company is subject to registration by the relevant organizational and administrative document (the order, the order, etc.). It is applied by all divisions of the company (including allocated for separate balance) since January 1 the year following after year of adoption of the relevant organizational and administrative document.

The newly created company draws up the accounting policy elected by it according to this paragraph before the first submission of financial statements, but no later than 90 days from the date of acquisition of rights of the legal entity. The chosen accounting policy is considered applied from the date of state registration of the company.

12. Changes in accounting policy are possible in the cases provided by the charter of the company or upon the demand of the body establishing standards or for more exact reflection of property and financial position and results of activities of the company in financial statements.

For example, changes in accounting policy can take place in case:

a) reorganization of the company (merge, separation, accession);

b) changes of owners;

c) changes in the current legislation and system of normative regulation of financial accounting;

d) to development of new methods of financial accounting.

Change in accounting policy shall be reasonable and is drawn up by the administrative document (the order, the order, etc.), with indication of the effective date.

 

Disclosure of accounting policy

13. The accounting policy accepted by the company shall be opened for internal and external users of financial statements. All methods and methods of financial accounting used by the company in the accounting period and significantly influencing assessment and decision making by users of financial statements are subject to disclosure.

14. In case of disclosure of accounting policy it is necessary to proceed from condition of materiality of information for users of financial statements. For this purpose in financial statements it is necessary to open the options of accounting policy accepted by management of the company at least in the relation: recognitions of the income; consolidation policy; joint and associates; recognitions of tangible and intangible assets and charge of their depreciation (depreciation); capitalizations of borrowing costs; construction contracts; investments; financial instruments; leases; costs for research and developmental developments; inventory stocks; taxes, including delayed taxes; pension expenses, insurance and other expenses on allowance payment to personnel; transfer of foreign currencies and hedging; determinations of type of activity, geographical segmentation and methods of income distribution and expenses between segments; inflation accounting; government subsidies.

The structure and contents of information on accounting policy of the company for specific questions which is subject to disclosure in financial statements are established by the relevant NSBU.

15. If accounting policy of the company is developed based on the fundamental assumptions of financial accounting established by this standard, then they can not to reveal in financial statements. When forming accounting policy on the basis of assumptions, excellent from provided by this standard, such assumptions, together with the reasons of their application and assessment of their consequences in value term, shall be in detail opened in financial statements.

16. Accounting policy of the company shall be placed at the beginning of appendices to financial statements for accounting year. Interim (quarter) financial statements of the company may contain not information on accounting policy if in the last there were no changes since creation of the previous reports including accounting policy.

17. The changes in accounting policy significantly influencing assessment and decision making by users of financial statements in the accounting period or in subsequent periods and also the reasons of these changes and assessment of their consequences in value term are subject to the isolated disclosure in appendices to financial statements.

18. Disclosure of accounting policy does not justify the wrong or inexact reflection of information and does not remove from management of the company of responsibility for violation of statutory rules of financial accounting and creation of financial statements.

 

Date of the introduction of the standard in force

19. This standard becomes effective since January 1, 1998.

NATIONAL ACCOUNTING STANDARD 2

"INVENTORY STOCKS"

Introduction

1. This standard is developed on the basis of the International accounting standard 2nd "Inventory stocks" accepted by Committee on MSBU in 1975 and reviewed in 1993.

 

Purpose

2. The purpose of this standard consists in establishment of rules of assessment of the inventory stocks (IS), determinations of their cost and reflection in financial statements. Calculation of cost is basis of accounting of inventory stocks which is recognized as asset until charge of sales return. This standard is practice guidance for determination of cost of inventory stocks and its subsequent recognition as expense, including difference between cost and net value of realization of inventories.

 

Coverage

3. This standard extends on all legal entities and physical person which are engaged in business activity and registered in the Republic of Moldova and also to their branches, representations and other structural divisions located both in the territory of Moldova and beyond its limits.

4. This standard is not applied to assessment:

a) incomplete works on construction contracts, including directly related works on service provision contracts (NSBU 11 "Construction contracts");

b) financial instruments (NSBU 32 "Financial instruments");

c) self-produced inventory stocks, including animals on cultivation and sagination, products rural and forestry, minerals in cases when they are estimated on the net value of realization.

5. Inventory stocks on which the reference in paragraph 4 c) is given are estimated on the net value of realization at certain stages of production process or after its completion. For example, when the grain yield is already reaped or minerals are extracted and their sale is provided under the terms of the provisional contract or according to government guarantee or when there is homogeneous market and insignificant risk of the fact that the goods will not be sold.

 

Determinations

6. In this standard terms with the following content are used:

Inventory stocks are assets:

a) held for sale in case of regular economic activity;

b) registered in work in progress;

c) intended for consumption in production process and when rendering services.

They include:

a) materials, held for use in production process;

b) work in progress;

c) finished goods;

d) goods, including the earth and other tangible assets which were purchased and held for resale;

e) the invaluable and fast-wearing-out objects.

Original cost (acquisition value or historical cost) - the amount of the paid money or fair market value of other form of compensation provided in case of acquisition of inventory stocks.

Fair market value - the amount for which the asset can be exchanged in the course of commercial transaction between independent parties.

The Net Value of Realization (NVR) is the expected selling price of inventory stocks during regular economic activity reduced by expected expenses on picking and the organization of sales.

Book value of all invaluable and fast-wearing-out objects - original cost (acquisition value) of the invaluable and fast-wearing-out objects which are in warehouse plus expected residual cost of the objects which are in operation on which depreciation is charged.

The worn-out cost - original cost of the invaluable and quickly wearing out objects or other amount replacing it cost in financial statements minus expected residual cost.

Residual cost - net amount (cost of suitable material values) which the company assumes to receive from asset after the term of its useful use.

 

Assessment of inventory stocks in financial statements

7. Inventory stocks are reflected in financial statements on the smallest amount from cost and the net value of realization.

 

Cost of inventory stocks

8. Cost of inventory stocks includes purchase costs, costs on conversion and the other costs connected with delivery of inventory stocks to the storage location and their reduction in proper condition.

 

Purchase costs

9. Purchase costs of inventory stocks include the cost of purchases, duties on the import and other taxes provided by the current legislation (except taxes which shall be returned to the company by tax authorities subsequently), and also the transportation expenses which are directly connected with purchase of goods, production supplies and services of third parties. Trade discounts, the amounts of return of goods, finished goods and the amount of other adjustments are subtracted in case of cost determination on acquisition.

10. In some cases purchase costs of inventory stocks can include currency exchange rate difference which arose directly in case of acquisition of inventory stocks on which the account in foreign currency (NSBU 21 "Consequences of changes of the currency exchange rates") was drawn up. The specified difference can result from strong devaluation or currency depreciation that cannot be prevented as there are no practical methods of hedging (insurance). Therefore it leads to increase in obligations which cannot be paid in connection with acquisition of inventory stocks.

 

Costs on conversion

11. Costs on conversion of inventory stocks include direct costs on the compensation, variables and fixed indirect production costs incurred in case of conversion of materials in finished goods.

Direct costs on compensation - labor costs of the main production personnel of the company, including award and other payments of the stimulating and compensating nature.

Variable indirect production costs - costs of the company which size depends on production scope change (for example, costs for auxiliary production materials and for compensation of auxiliary workers).

Fixed indirect production costs - costs of the company which size relatively does not depend on production volume (for example, the added depreciation, expenses on content and operation of buildings and the equipment, etc.).

12. Variable indirect production costs are distributed on each unit of the made products on the basis of the actual use of production capacities.

Fixed indirect production costs carry on costs on conversion on the basis of normative capacity of production equipment. Normative capacity is the production rate which, as expected, can be reached on average within several periods or seasons under normal circumstances, in view of the losses in capacities resulting from carrying out planned and technical works. If the actual production volume is equal or above normative capacity, the actual amount of fixed indirect production costs completely belongs on costs on conversion. When the actual production volume is lower than normative capacity, fixed indirect production costs belong on costs on conversion on the basis of the normative rate received as a result of division of actual amount of these costs for normative capacity. The remained amount of fixed indirect production costs is recognized as expense during that accounting period during which they were suffered.

13. If in one production process several types of products are developed, costs on their conversion are distributed by one of the following methods:

a) if labor costs of production workers have direct reference on each type of products, their accounting is performed separately. Indirect production costs are distributed according to the method chosen by the company, for example, in proportion to the selling cost of each product at production process stage when each product can be determined separately or at the time of production completion;

b) if labor costs of production workers are not considered by each type of products, they are distributed together with indirect production costs according to the method chosen by the company on rational and consecutive basis (Item

a) paragraph 13 of this standard).

In the presence of by-product the last is estimated on the net value of realization which is subtracted from the total amount of conversion costs. Costs less the cost of by-product are distributed between products types according to Items and) and b) paragraph 13 of this standard.

 

Other costs

14. Additional costs which arise in the course of acquisition, conversion and realization of inventory stocks belong to other costs. They are subdivided on included and not included in cost of inventory stocks.

15. Carry costs to the other costs included in cost of inventory stocks by individual orders or costs on bringing inventory stocks (finished goods and goods) to proper condition upon the demand of the buyer, and also the additional costs on transportation connected with implementation of these transactions.

16. As expense for the accounting period in which they were suffered treat the other costs which are not included in cost of inventory holdings and recognized:

a) the above-standard losses connected with unusually high level of the material consumption, labor power, and the other not planned production costs;

b) storage costs if they are not provided by engineering procedure;

c) administrative expenses which are not connected with delivery of inventory holdings to the location and finishing them to proper condition upon the demand of buyers now;

d) costs for realization.

17. In some cases, 23 "Borrowing costs" determined by NSBU, costs on the credits and loans join in cost of inventory stocks.

 

Cost of inventory stocks at the companies of service industry

18. Cost of inventory stocks at the companies of service industry consists of labor costs of personnel and indirect production costs. Labor costs at the companies of service industry include the main and additional salary, various allowances, surcharges, awards added to the personnel which are directly occupied in the sphere of provision of services. Indirect production costs join in cost of inventory stocks at the end of the accounting period only at those companies of service industry which have work in progress. Labor costs of the workers who are engaged in realization and administrative personnel do not join in cost of inventory stocks, and are recognized as expense of the accounting period in which they were suffered.

 

Assessment of inventory stocks in the current accounting

19. For the current assessment of inventory stocks the following methods can be used:

a) normative cost;

b) retail sales.

20. The method of normative cost is used for the current assessment and operating control of availability and movement of finished goods and work in progress. Normative cost is determined proceeding from the normative level of direct material costs, direct costs by compensation and indirect production costs. Cost rates shall be analyzed systematically and be reviewed as required.

21. The retail method (gross profit percent) is applied, as a rule, in trade to assessment of large number of the goods having approximately identical profit in the price of sales in case of quickly changing assortment. In the current accounting of movement of goods their assessment is performed by retail method on selling prices with allocation of the allowance or on acquisition value. The writedown of acquisition value of goods is allowed in the cases provided in paragraph 26 of this standard. Irrespective of the chosen option of assessment of goods in the current accounting in financial statements they are reflected on the smallest amount from actual cost and net value of realization.

22. Cost of units of inventory stocks which usually are not interchangeable and the inventories made and intended for special projects is determined by identification method.

23. In the presence of the big range of interchangeable inventory holdings their cost is determined by the FIFO LIFO methods or weighted average cost.

24. The FIFO method assumes that the inventory stocks which the first arrived the first and are disposed therefore assessment of the disposed inventory stocks is performed in the same sequence. The remaining balance of inventory stocks is by the end of the reporting period estimated on acquisition value of the last batches of the arrived inventories.

25. The LIFO method assumes that the inventory stocks the which the last arrived, the first and are disposed therefore assessment of the disposed inventory stocks is performed in the same sequence. The cost of the disposed inventory stocks for the accounting period is estimated on acquisition value of the last arrived batches of inventory stocks. The remaining balance of inventory stocks is by the end of the reporting period estimated on acquisition value of the first batches of the arrived inventories.

26. The method of weighted average cost provides that cost of the inventory stocks which were disposed and remained at the end of the period is determined based on weighted average cost of the same units which are in remaining balance for the beginning of the accounting period and purchased or made by the company during the accounting period. Weighted average cost can be calculated for certain period of time or in process of receipt of the next batch of inventory stocks.

 

Net Value of Realization (NVR)

27. Inventory stocks are estimated and reflected in financial statements on the net value of realization when they below cost that takes place in case of:

a) their damage or partial spoil;

b) partial or their complete obsolescence;

c) reduction of price of their sale;

d) increase of expected costs for picking and organization of their sales.

28. Assessment of inventory stocks on the net value of realization is made on:

a) to types;

b) to the groups of interchangeable units (within the same assortment) having identical appointment or final application, made and realized in the same geographical zone.

Are reflected in the companies of service industry of costs on each type of service on which the extra price of sale is established. Therefore the net value of realization is determined by each type of the incomplete services considered as separate types of inventory stocks.

29. Calculation of net value of realization of inventory stocks is made on the basis:

a) the market prices existing at the time of calculation of the amount expected to obtaining from sale of inventory stocks;

b) fluctuations of market prices or cost of the inventory stocks which are directly connected with the events of economic activity taking place after the accounting period in that measure in what these events confirm the conditions existing by the end of the reporting period;

c) purposes of the inventory stocks which are in remaining balance by the end of the reporting period for sale or use in production.

30. Net value of realization of the inventory stocks which are in remaining balance by the end of the reporting period is determined on:

a) to contract prices if they are held for sale under the guaranteed contracts;

b) to the current market prices if they are not confirmed with contracts, but also are held for sale.

Unforeseen losses on contractual sales or purchases of firm are considered according to NSBU 10 "The unforeseen events and events of economic activity which are taking place after reporting date".

31. Materials and other inventories, held for use in production of finished goods, are not subject to assessment below their cost if it is expected that the finished goods which basis they are will be sold at the price equal or exceeding its cost. If it is supposed that cost of finished goods is higher than the current market prices, then materials and other inventories are estimated on the net value of realization.

32. On reporting date of each next period book value of inventory stocks is reviewed. If in previous period they were estimated in balance on the net value of realization and continue to be registered in remaining balance by the end of the reporting period at the same cost, and circumstances changed and the net value of realization increased, then these inventories are estimated on the smallest amount from cost and the reviewed net value of realization.

 

Recognition of cost of inventory stocks as expense

33. The cost of the sold inventory stocks is recognized as expense that period in which the income relating to this sale was determined. It provides compliance of the made expenses and the gained income. In case of assessment of inventory stocks on the net value of realization there are losses which are recognized as expense that period when they took place. If in the next accounting period the net value of realization of inventory stocks increased, the difference from this increase within cost is recognized as the income in that period when there was increase in net value of realization.

34. The inventory stocks used for creation of fixed asset objects by economic method or for their completion and installation join in the cost of objects and are recognized as expense gradually during the term of useful operation (functioning) of these assets.

 

Features of accounting of the invaluable and fast-wearing-out objects

35. Belong assets which cost of unit is less than limit set by the legislation irrespective of useful life or service life of which to the invaluable and fast-wearing-out objects it is less than one year irrespective of unit cost. The structure of the invaluable and fast-wearing-out objects turn on tools and devices of general and special purpose, the replaceable equipment, technological container, production and economic stock, special clothes and footwear and safety devices, bedding, shoddy constructions and devices, other objects (tableware, sports and tourist equipment, tarpaulin, etc.).

36. The invaluable and fast-wearing-out objects which cost of unit is lower 1/2 set limit are subject to write-off on costs or expenses in process of leave of these objects from warehouse in operation.

37. On the invaluable and fast-wearing-out objects which cost of unit exceeds 1/2 set limit in case of their leave from warehouse in operation depreciation in the amount of 100% of their cost minus expected residual cost is charged. At the state companies and the companies where the share of the state in the authorized capital constitutes 51 and more percent, throughout the entire period of operation by responsible persons it is recorded their uses on the established groups. Depreciation belongs on costs or expenses of the company depending on purpose of use of the invaluable and fast-wearing-out objects. In case of disposal of the invaluable and fast-wearing-out objects their worn-out cost is written off on reduction of earlier added depreciation.

38. On shoddy (not title) constructions, devices and devices depreciation is charged during the term of their useful functioning and if this term exceeds the term of construction of the main object, - that proceeding from duration of its construction. The added depreciation of shoddy constructions, devices and devices is included total and administrative expenses on construction of the main object.

 

Disclosure

39. In financial statements it is necessary to open

a) evaluation methods of inventory stocks;

b) total carrying amount of inventory stocks and their book value on the classification groups accepted at the company, residual cost of the invaluable and fast-wearing-out objects;

c) the book value of inventory stocks calculated on the net value of realization;

d) the cost of sales of inventory stocks recognized as expense in the accounting period;

e) the amount of any increase in net value of realization of inventory holdings within their cost which is earlier written off as losses as a result of their assessment on the net value of realization which is recognized as the income in this accounting period according to paragraph 32 of this standard;

f) circumstances or events of economic activity which led to increase in net value of realization of inventory stocks within their cost according to paragraph 32 of this standard;

g) book value of the inventory stocks pledged as guarantee of obligations.

40. Write-off of difference between cost and net value of realization of inventory stocks can lead to consequences which disclosure is provided in NSBU 8 "Net profit or loss for the accounting period, material mistakes and changes in accounting policy".

 

Date of the introduction of the standard in force

41. This standard becomes effective since January 1, 1998.

NATIONAL ACCOUNTING STANDARD 3

"STRUCTURE OF COSTS AND EXPENSES OF THE COMPANY"

Introduction

1. This national standard which does not have analog in the list of international accounting standards is developed for simplification of assimilation of new cost accounting system and expenses at the initial stages of reform of financial accounting.

In this standard all costs and expenses connected with implementation of business activity irrespective of requirements of the taxation are reflected.

 

Purpose

2. The purpose of this standard is determination of structure of costs of the companies of productive, trading activity and service industry, expenses of operating, investing and financial activities, and also extraordinary losses.

 

Coverage

3. This standard extends on all legal entities and physical person which are engaged in business activity and registered in the Republic of Moldova and also to their branches, representations and other structural divisions located both in the territory of Moldova and beyond its limits.

4. The stated below cost types and expenses found only partial reflection in this standard (in detail they are considered in the following NSBU):

a) costs and expenses on acquisition and conversion of inventory holdings, procedure for their distribution and inclusion in cost of sales (NSBU 2 "Inventory stocks");

b) depreciation (depreciation) of the worn-out assets (NSBU 13 "Accounting of intangible assets"; NSBU 16 "Accounting of non-current tangible assets");

c) extraordinary expenses and losses by the cancelled orders, and also correction of material mistakes on costs and expenses (NSBU 8 "Net profit or loss of the accounting period, material mistakes and changes in accounting policy");

d) costs for research and development works (NSBU 9 "Cost accounting on research and development works");

e) the borrowing costs which are subject to capitalization (NSBU 23 "Borrowing costs");

f) costs according to construction contracts (NSBU 11 "Construction contracts");

g) rent costs (NSBU 17 "Lease accounting").

 

Determinations

5. In this standard the following concepts are used:

Costs - the consumed resources on production of products and rendering services for the purpose of income acquisition.

Direct costs - costs which can be directly carried on certain product or other cost object.

Indirect costs - costs which cannot be carried in the direct way on specific product or cost object.

Variable costs - costs which change in proportion to amount of products, the performed works, services.

Fixed costs - costs which remain in certain range of changes constants, irrespective of scope changes of production or business activity of managerial personnel.

Direct material costs - the cost of raw materials, the materials, the semifinished products used in production which veshchestvenno are its part and included in cost of finished goods in the direct way.

Direct costs on compensation - the costs for salary payment to workers included in cost of finished goods in the direct way. For the companies of service industry the concept labor costs is used.

Indirect production costs - the costs connected with servicing and management of production divisions which cannot be included in cost of finished goods (services) in the direct way and are distributed according to NSBU 2 "Inventory stocks".

Expenses - all expenses and losses (losses) which are subtracted from the income when calculating profit (loss) of the accounting period.

Expenses of operating activiies - the expenses connected with implementation of the main activities of the company.

Expenses of investing activities - the expenses and losses connected with disposal of non-current assets.

Expenses of financial activities - the expenses resulting from change of size and structure of equity and loans (credits).

Extraordinary losses - the losses suffered as a result of the events which are not relating to regular activities.

Cost of sales - part of costs which belongs to sold to products, to goods and services.

Period expenses - expenses on sales of products, goods and services, on management, servicing, production organization.

Deferred expenses - the expenses which arose in the accounting period, but relating to future periods (for example, the advance payments connected with lease, etc.).

Engineering procedure - the production process covering all transactions on conversion of raw materials, materials, on use of components in case of production and assembly of products.

6. Assignments on social insurance and providing are made from all added work payment amount according to the current legislation.

 

Structure of costs

The structure of the costs included in cost of products (services) includes the following Articles: material costs, labor costs, indirect production costs. In separate industries of the national economy, except specified, also other costs reflecting features of their production economic activity can be provided (for example, in the extracting industries - depletion of natural resources, in the energy industry depreciation of fixed assets and others).

 

Material costs

7. Treat the material costs included in cost of finished goods, work in progress: on production enterprises - direct material costs, at the companies of service industry - costs for materials. At trade enterprises of costs for materials do not join in cost of goods, and belong on period expenses.

 

Direct material costs

8. On production enterprises material cost, used in production (technological) process, included in cost of finished goods belongs to direct material costs, namely:

a) the raw materials and materials constituting basis of the developed products, or being necessary component in case of its production;

b) the components and semifinished products which are exposed to assembly or additional processing at this company;

c) the cost of the services of production nature which are carried out by the third-party companies and the related additional costs attributable to material cost rise in price, for example:

- accomplishment of separate transactions on production of products, processing of raw materials and materials;

- carrying out testing by determination of quality of the consumed raw materials and materials used only for production of these products;

d) the fuel of all types spent for the technological purposes, development of all types of energy;

e) the energy of all types (electric, thermal, compressed air, cold, water and other types) spent for technological, transport and other production needs of the company.

 

Costs for materials

9. For the companies of service industry of costs for the materials used in the course of the main activities include:

a) auxiliary materials;

b) construction materials;

c) fuels and lubricants;

d) spare parts for rendering services in repair;

e) other materials.

 

Labor costs

10. Treat the labor costs included in cost of finished goods, work in progress: on production enterprises - direct costs on compensation, and at the companies of service industry - labor costs. At trade enterprises labor costs do not join in cost of goods, and belong on period expenses.

 

Direct costs on compensation

11. Direct costs on compensation of production enterprises join labor costs of the main production personnel of the company, including award and other payments of the stimulating and compensating nature. Treat them:

a) the salary for actually performed work estimated proceeding from price-work quotations, the tariff charges and official pay rates and the fees according to the forms and wages systems taken at the company and also:

- to workers of communication, construction, transport and other workers whose permanent job proceeds in transit or traveling nature, for the every day of stay in transit paid from the moment of departure until return to the location of their companies has salary supplements;

- awards for production results, allowances to the tariff charges and salaries for professional skill;

- the amounts paid (in case of performance of works by shift method) in the amount of the tariff charge, salary for days of stay in transit from the location of the companies to place of employment and back, provided by the working schedule on watch, and also for days of delay of workers in transit on weather conditions or because of the transport organizations relating to specific construction objects and capital repairs;

- compensation of students of educational institutions and pupils of the average special and professional educational institutions passing work practice at the companies and also compensation of pupils of comprehensive schools during professional orientation;

- compensation of the workers who are not on the staff of the company for accomplishment of works on the signed agreements of civil nature by them if calculations with workers are made for the performed work by directly company;

b) payment of days of rest (compensatory holidays) provided to workers for work over the normal duration of working hours in case of shift method of labor organization in case of the summed-up accounting of working hours and in other cases established by the legislation;

c) payments of the compensating nature, connected with operating mode and working conditions, including allowances and surcharges to the tariff charges and salaries for work at night, overtime work, work in days off and holidays, work in the multiple-shift mode, for combination of professions, expansion of zones of servicing, for work in heavy, harmful, especially harmful conditions, etc.;

d) payment according to the current legislation of the next (annual) and additional vacations (compensation for unused leave), preferential hours for teenagers, work stoppages of mothers for feeding of the child, and also time of passing of medical examinations, accomplishment of the state obligations;

e) fees on compulsory national social insurance and fees of compulsory medical insurance.

f) other payment types of work of the workers occupied in production.

 

Labor costs

12. At the companies of service industry labor costs include the main and additional salary, various allowances, surcharges, awards charged to the personnel which are directly occupied in the sphere of provision of services.

 

Indirect production costs

13. Indirect production costs take place on production enterprises and the companies of service industry and include:

a) costs for maintenance of fixed assets of production appointment in working order (costs for technical inspection and leaving, for carrying out the running, average and capital repairs); on accomplishment of sanitary and hygienic regulations, including charges of the rooms and stock provided by the company to medical institutions for the organization of first-aid posts directly in the territory of the company on maintenance of purity and procedure on production;

b) charges and operation of the means of nature protection appointment relating to production process including payments for emissions (dumpings) of pollutants into the environment;

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