Plotnikov V.S.Balakovo branch of Russian Presidential Academy of National Economy and Public Administration (RANEPA), Moscow, Russian Federation vcplotnikov@yandex.ru
Pakhomov A.S.Saratov Socio-Economic Institute, Branch of Plekhanov Russian University of Economics, Saratov, Russian Federation Pahomov.A.C@gmail.com
Subject The article reflects the influence of the modern Conceptual Framework for Financial Reporting with regard to the concept of capital and the concept of capital value maintenance on the structure and nature of equity capital in the public financial statements of a commercial organization. Objectives The purpose and main objective of the study is to develop a hypothesis, a new methodological approach to reflecting the value of capital estimates as a measure of equity capital of a commercial organization that provides information to stakeholders, especially the providers of financial capital, on losses from impairment of depreciable fixed assets and on the process of these losses recovery by the capital, which is earned by invested capital. Methods The methodology of the capital estimates hypothesis bases on updating the understanding of losses in the fair value of depreciable fixed assets, which are expressed in the estimation of fair value of three types of their depreciation: physical, functional and market. At the same time, we made a change in the concept of "depreciation", which, in contrast to its traditional definition as "a process of transferring the cost of fixed assets on the value of the newly created product", is considered as earned capital created by previously invested capital. In these circumstances, the cost of earned capital (depreciation charges) enables to compensate losses from impairment of fixed assets' fair value. Simultaneously, the final result of capital estimates reflects the degree of compensation of losses from fixed assets impairment, which corresponds to the provisions of the concept of capital value maintenance. Results The proposed methodological technique focuses on the methods of estimating the fair value of fixed depreciable assets, which are in use taking into account the cost of their physical and functional depreciation determined by professional experts, as well as market depreciation, which is determined by professional accountants based on the analysis of market information on the present value of similar type of non-current assets. In these circumstances, we believe it is possible to consider accrued depreciation as an expense against losses in the value of a depreciable asset during its use. We conclude that the estimated capital in the structure of equity capital should reflect a possibility of earned capital to compensate losses in the asset's value in use, i.e. its use. Therefore, we believe that the information, which is generated within the capital estimates, will be very useful and consistent with the objective of IFRS 1 "First-time Adoption of International Financial Reporting Standards", which consists in the fact that financial statements should contain high quality information, which (a) is transparent for users and comparable with all other periods presented; (b) ensures an acceptable starting point for accounting; and (c) the expenditures on its generation should not exceed the benefits to users. Practical Application We considered corporate reporting of businesses that have transferred to preparation of financial statements under IFRS and the possibility of using the proposed approach in the accounting system of enterprises that are in process of transfer to financial statements under IFRS. Conclusions and Relevance On the basis of the material contained in the article, we conclude that losses from depreciable fixed assets impairment are a fair value of the largest depreciation value out of the three types of depreciation; depreciation is the cost of earned capital, capital earned by inverted capital that allows to compensate losses in fixed assets' value from their impairment. The significance of the research for accounting is that the proposed method allows determining the residual value of fixed assets in the double-entry system rather than by calculation. In addition, it enables to write off the amounts of accrued depreciation in one reporting period, to reflect them in the structure of capital estimates rather than to accumulate them on an accrual basis until fixed assets are completely written-off. The important point is that the final value (result) of capital estimates enables to evaluate the effectiveness of depreciation policy and reliability of evaluation of fixed assets in use.
Keywords: concept, capital maintenance, value, estimates, earned, fair value, asset in use, physical deterioration, functional, market, wear, depreciation
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