Sales of Fixed Assets by Enterprise: Accounting and Taxation Approach

Abstract

As management decisions on sales of fixed assets and related business transactions are of critical importance for enterprise management, the purpose of the article is to highlight the procedure of accounting and recognition of tax consequences of transactions on sales of fixed assets at enterprises. Specifics of accounting and taxation approaches used in recordingof transactions on sales of fixed assets are shown. Emphasis is made on differencein taxes occurring in transactions on sales of fixed assets by business entities paying tax on profit. Origins of the differences in taxes (the increased financial result prior to taxation or the decreased financial result prior to taxation) occurring in sales of fixed assets by a payer of tax on profit with the profit of past year higher than 20 million UAH are demonstrated. Information on accounting of fixed assets retirement through sales is given.Analysis of approaches based on accounting and taxation shows that enterprises keeping records by national accounting standards record fixed assets as non-current assets held for sales. As of the balance sheet date, these fixed assets are evaluated for financial reporting by the lowest value: either by balance sheet value or by net realizable value. Payers of tax on profit not using adjustment on difference in tax record sales of fixed assets in a way similar to accounting; those using adjustment do not record the revaluated sums and the consequences of tests on decrease (renewal) of the assets’ utility. Value added tax payers, when selling fixed assets by a lower value than the balance sheet value recorded in the accounting as of the beginning of a reported period, impute the additional tax liability on the surplus of the balance sheet value over the selling price.