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III International Conference on Luca Pacioli in Accounting History. III Balkans and Middle East Countries Conference on Accounting and Accounting History. June 19-22 2013, Istanbul
Research was undertaken in order to study the development of the amortization accounting methodology over the period of time from 1588 to the present day. The objects of the research were scholarly works concerned with the key issues of the amortization accounting methodology by such Russian and foreign authors as S.M. Barats, N.A. Blatov, R.Y.Veitsman, P. Gerstner, J.B. Dumarchey, А. Calmes, N. А. Kiparisov, W. le Coutre, F. Leitner, G. Mellis, G.Meiron, P.I. Reinbot, W. Riger, А.К. Roschakhovsky, А.P. Rudanovsky, Е.Е. Sivers, and E. Schmalenbach, as well as relevant regulatory acts and professional accounting standards.
It is believed that the Englishman G.Melis was the first to offer his definition of amortization in 1588 as the direct decreasing value of real assets (Littleton, 1933). In 1675 Jacques Savary referred to amortization as depreciation within the context of the reduction of current assets - the goods that went out of fashion. (Savary, 1675). Many years had passed since then, before a noted German accountant Richard Maatz concluded that “in the beginning amortization was understood as a reduction in estimated cost to be included in the balance sheet” (Maatz, 1902). During the railway construction boom in the middle of the nineteenth century, which demanded huge investment, this interpretation was set against its understanding as a reserve created for the purpose of acquiring new fixed assets instead of depreciated ones. Amortization was deemed to be reimbursed by proceeds. Since at the very beginning this factor was not given proper attention, amortization was not practiced as an accounting method. With no amortization charges made, the balance sheets of enterprises showed increased profits, and so shareholders demanded high dividends. However, some prudent business owners considered it necessary to keep part of the proceeds back to create the so called renewal fund (the renovation fund). “It was assumed that when the rolling stock, railway lines, buildings and facilities were depreciated, the railway administration would have available funds for the renewal of liquidated facilities.” (Sokolov Y.V. 2005).
Since then amortization has been understood as a notion of a dual nature: on the one hand “it represents the value by which the real fixed assets have decreased over a certain period of time”, while on the other hand “it expresses the real value amount accumulated in the asset for the reimbursement of the lost asset” (Roschakhovsky, 1910). The distinction between these two interpretations of amortization (depreciation and an asset renewal fund) was influenced dramatically by the balance sheet theories (static and dynamic) based on different kinds of the valuation of balance sheet accounts.
The discussions centered around the dynamic and the static balance sheet concepts revealed the differences between the notions ‘depreciation” and “amortization fund” (E. Schmalenbach , H. Niklisch, I.F.Shär). They showed that in the theory and practice of accounting depreciation and the amortization fund are the categories, which are not identical by their information function and are oriented at different costs (historical and replacement costs respectively). Consequently, they may be equal in value only in theory in the case of constant prices.
Summarizing, it should be emphasized that both concepts of the amortization theory are valid, each having its own aim and tasks even in our days. Accordingly, for every user of financial statements only one of them will provide a trustworthy valuation required for taking a specific task-oriented management decision.
That said, in recent domestic publications amortization has been mainly considered as just a mechanism allowing to reduce the tax base. Only a few publications by modern national authors have touched upon the issues of the valuation of the companies’ resources intended for fixed assets reproduction. However, in modern economy amortization performs not only the role of an accounting distributive procedure, but also becomes the instrument of financial management, which enables to direct cash flows for the effective reproduction of long-term assets.
Theoretists and practical men discussed about the nature of amortization in Russia from 1898 until the present time. The formation of the accounting of amortization in Russia is considered in the article in the framework of this discussion.
This article is the first part of the historical review of the occurrence and development of concep- tual approaches to measuring goodwill in economic science since the end of the 19 century to the 70-ies of 20 century. The problem of goodwill measurement arose in economic science at the end of the 19th century and still discussed in the academic and practitioner communities around the world. Despite numerous studies and the adoption of accounting standards issued by various pro- fessional organizations internationally, existing opinions on this issue vary and change frequently. The need to preserve the established recognition criteria, on the one hand, and the need to provide useful information, on the other, has led to a number of controversial issues in the measurement and recognition of goodwill. In the study we analyze the historical experience in the form of goodwill perceptions, identifying historical patterns suitable for improvement of modern theory and practice of measuring goodwill. Methodological basis of the study consists of the works of distinguished sci- entists in the fields of accounting, international and generally accepted standards of accounting and reporting. The authenticity of the author’s findings confirmed by a logical use of scientific methods such as historical-and-comparative, historical-and-typological and historical-and-system method. The author track back the transformation of methods of measuring goodwill in academic research and normative documents of the nineteenth and twentieth centuries. Separate section is devoted to modern concepts of goodwill measurement, which represents an alternative to the existing account- ing standards. а gradual, cumulative and cyclical process of development of methods for measuring goodwill was identified. We found that in periods of economic growth the paradigm of current value usually dominates, while in periods of recession the historical cost paradigm is rolled back.
During 1998-2010 the National Research University – Higher School of Economics (Moscow) has been surveying the results of activities of most leasing market operators in Russia, including all the largest ones. The results of the scheduled annual analysis undertaken by us to survey the activities of leasing companies in the Russia indicate that the year 2010 was successful for the leasing business. According to the Leaseurope, and author’s data, Russia occupies the 5th place in Europe after Germany, United Kingdom, Italy, French. In practice many Russian leasing companies have managed not only to copy but also successfully to adapt the experience of the countries with developed leasing industries. Despite the growth in new business, account must be taken of the quality of the leasing portfolio. It turned out that it just got a little better as compared with the previous year. The analysis showed that cost of loans taken for financing leasing operations, as well as the cost of the funds of a leasing company, the funds of the lessee, the use of factoring, promissory notes/exchange bills, securities and other instruments, depends on a variety of factors, including: financial independence of leasing companies; the risks associated with the sale of a leasing product; the security for the transaction; the terms of depreciation of leased property, the terms of credit contract and of leasing contracts; the currency of the leasing transaction; whether the funds are borrowed on the domestic or on the international capital market; the schemes for carrying out a leasing operation, etc. With each year there the number of Russian leasing companies that can obtain financing directly from foreign banks grows. There is a growth in the volume of credit operations with the involvement of the national agencies for insurance of export-import operations, e.g. from Germany, Austria, Italy, the Netherlands, the USA and other countries. Securitisation of leasing assets held at the junction of four financial tools – lending, leasing, factoring, securities issues. This innovative mechanism that requires subtle scientific and practical configuration achieves remarkable economic performance update, modernisation and re-equipment of enterprises. The author has developed a system of securitisation leasing asset pricing which is feasible through a set of equations that balance the interests of the participants. The article also examined the status of concentration of leasing market, its regional and sectoral structures.
This article discusses the use of public finance to reindustrialize Russian economy. The authors focus on the growing wear and tear of fixed assets, which damages the competitiveness of the Russian economy (even compared to other CIS economies). They show how a proper implementation of changes to corporate profits tax (CPT) may improve the situation and provide a calculation of CPT and VAT deduction in case of repair of fully depreciated fixed assets. They also prove that cost of repair of fully depreciated fixed assets should not be deducted for CPT purposes or affect the incoming deductible VAT.
During 1998-2011 the National Research University – Higher School of Economics (Moscow) has been surveying the results of activities of most leasing market operators in Russia, including all the largest ones. The results of the scheduled annual analysis undertaken by us to survey the activities of leasing companies in the Russia indicate that the year 2010 was successful for the leasing business. According to the Leaseurope, and author’s data, Russia occupies the 5th place in Europe after Germany, United Kingdom, Italy, French. In practice many Russian leasing companies have managed not only to copy but also successfully to adapt the experience of the countries with developed leasing industries. Despite the growth in new business, account must be taken of the quality of the leasing portfolio. It turned out that it just got a little better as compared with the previous year. The analysis showed that cost of loans taken for financing leasing operations, as well as the cost of the funds of a leasing company, the funds of the lessee, the use of factoring, promissory notes/exchange bills, securities and other instruments, depends on a variety of factors, including: financial independence of leasing companies; the risks associated with the sale of a leasing product; the security for the transaction; the terms of depreciation of leased property, the terms of credit contract and of leasing contracts; the currency of the leasing transaction; whether the funds are borrowed on the domestic or on the international capital market; the schemes for carrying out a leasing operation, etc. With each year there the number of Russian leasing companies that can obtain financing directly from foreign banks grows. There is a growth in the volume of credit operations with the involvement of the national agencies for insurance of export-import operations, e.g. from Germany, Austria, Italy, the Netherlands, the USA and other countries. Securitisation of leasing assets held at the junction of four financial tools – lending, leasing, factoring, securities issues. This innovative mechanism that requires subtle scientific and practical configuration achieves remarkable economic performance update, modernisation and re-equipment of enterprises. The author has developed a system of securitisation leasing asset pricing which is feasible through a set of equations that balance the interests of the participants. The article also examined the status of concentration of leasing market, its regional and sectoral structures.