Overhaul of fixed assets in accounting

Source: RosKvartal® - Internet service No. 1 for management organizations
Major repairs involve the complete renovation of a building - replacement or restoration of building structures, repair of utility networks and communications. The purpose of a major overhaul is to eliminate wear and tear or reduce the percentage of wear and tear of a building or premises, as well as maintain and restore its serviceability. Major works include large-scale work - replacement of the roof, plaster on the facade of the building, hot and cold water risers, etc. Major repairs of common property are carried out by decision of the general meeting of premises owners. Owners have the right to decide whether replacement of elements of common property is necessary in case of their obsolescence (clauses 21, 23 of the RF PP dated 08/13/2006 No. 491). Information that the house requires major repairs is reflected in the inspection report. In addition, the decision on major repairs can be made by federal executive authorities or state authorities of constituent entities of the Russian Federation - GZHN bodies, which exercise control over the use and safety of the housing stock (clause 22 of the RF PP dated 08/13/2006 No. 491).

Major and current repairs of the OS, unlike other recovery methods

In the production activities of organizations during the operation of the operating system, wear and tear of the operated objects naturally occurs, and breakdowns occur.
Their timely restoration allows you to increase their service life and avoid the cost of purchasing new equipment. Recovery is possible through modernization, reconstruction and repair. Modernization and reconstruction are recognized as work that improves or creates new technical and economic characteristics of an object. Whereas repair includes a set of measures aimed at replacing individual structures, parts, and maintaining its working condition. Repairs are divided into current and major. Current repairs are aimed at prevention, maintaining the facility in working order and eliminating minor faults. Capital - guarantees the restoration of the technical parameters of the object and its working condition.

Overhaul can be comprehensive, covering the entire facility, or selective, including the repair of individual parts of the facility.

The validity of OS repairs is established by the technical services of organizations by determining the order of scheduled preventive maintenance, while assigning the type of repair.

A feature of accounting for major repairs compared to other types of restoration is that repair costs are included in current costs, while costs for modernization and reconstruction are included in capital costs.

For key differences between repair and OS modernization for tax purposes, see ConsultantPlus. Trial access to the legal system is free.

Explanations on the topic

About the author of this article

Ella Zaluzhnaya Project Expert Graduated from the University of the Interparliamentary Assembly of the Eurasian Economic Community with a degree in Finance and Credit.

In 2013 - North-Western Institute of Management of the Russian Academy of National Economy and Public Administration under the President of the Russian Federation under the program: “Management of state and municipal orders.” In 2014, he graduated from the National Research University Higher School of Economics in the program “Management of State and Municipal Orders.” In 2020, she underwent professional retraining on the basis of educational and Sberbank-AST under the program “Procurement Management for State and Municipal Needs (44-FZ) and Corporate Procurement (223-FZ).”

From 2008 to 2009 she worked as an economist in the purchasing department of an ambulance. Since 2009 - leading economist of government procurement at the Theater named after. N.P. Akimova. In 2011 - specialist in the Exchange Trading Department (trading for Gazprom, Transneft). Since 2012 - Deputy Director for Financial and Economic Activities at the State Budgetary Institution. Since 2021 - advises customers and suppliers.

Other publications by the author

• 2021.09.30Bank guaranteesWhat is an independent guarantee
• 2021.09.30 Customer documents Special rules for government procurement of radio-electronic products under Resolution No. 878 and Order 126n
• 2021.09.29 Supplier documents What should a supplier do when changing the head of an organization
• 2021.09.20Supplier documentsInstructions for replacing the digital signature when changing the director of the organization in 2021

OS overhaul in accounting - postings

Once the decision on the need for a major overhaul of fixed assets has been made, the facility can be restored by the organization itself or by using equipment and workers from a third-party company on a contract basis. If you go the route of overhaul by the organization’s services, then you need to take into account that expenses will include the cost of spare parts and materials, wages, and insurance premiums.

Accounts for carrying out major repairs in various ways will be as follows:

• if there is a structural unit (repair service):

Dt 23 Kt 10 (16, 69, 70) - repair costs collected;

Dt 20 (25, 26, 29, 44) Kt 23 - expenses are written off depending on the use of the operating system (the account on which depreciation is recorded is debited);

• if there is no repair service, account 23 is not used, and the costs are written off directly to the cost account:

Dt 20 (25, 26, 29, 44) Kt 10 (16, 69, 70);

• If the repair is carried out by a contractor, the cost entry will be:

Dt 20 (25, 26, 29, 44) Kt 60.

For long-term overhauls, it is recommended to transfer objects to a separate subaccount of account 01 “OS under repair”.

For more information about what costs are considered justified, read the material “What are the costs of repairing fixed assets?”.

The recommendations of ConsultantPlus experts will help you write off materials for OS repairs in accounting and for income taxes. Get free trial access to the system and go to the Ready-made solution.

We form a draft contract

The standard conditions of a construction contract were approved by order of the Ministry of Construction and Housing and Communal Services of the Russian Federation No. 9/pr dated January 14, 2020. According to the recommendations of the Ministry of Construction, standard conditions contain:

• construction schedule;
• delivery and unloading of construction materials by the contractor;
• availability of working documentation at the site;
• payment schedule;
• determining the cost of the construction stage.

When preparing a draft contract for selective or comprehensive overhaul, include in its provisions:

• terms and mode of construction;
• the contractor's obligation to keep a repair log;
• procedure for carrying out hidden work;
• the possibility of the customer making a decision on unilateral refusal of obligations under the contract if, in the process of its execution, it is revealed that the contractor does not comply with the requirements of Federal Law No. 44, including additional ones, which are specified in the tender documentation;
• the customer’s right to conduct technical supervision;
• unforeseen expenses and their maximum amount;
• deadline for processing the acceptance results;
• list of documents that the contractor provides for payment;
• warranty obligations;
• procedure for changing and terminating the contract.

Attach to the draft contract the documents in accordance with which the contractor carries out construction:

1. Technical task.
2. Statement.
3. Project (if available).
4. Estimates.
5. Contract execution schedule.

Justification and confirmation of costs for major repairs

When carrying out major repairs of fixed assets, special attention should be paid to the order of registration of the process. During inspections, tax authorities place high demands on documentary evidence of repairs that have taken place.

First of all, the need for major repairs should be justified. To do this, a report is drawn up, which records the identified defects, or a defect sheet.

You can download a ready-made sample of a defect report from ConsultantPlus, receiving free test access to the system.

The transfer of an object for repair is formalized by an invoice for internal movement - in the case of repairs carried out by its own specialized service or an acceptance certificate if the object is transferred to a contractor.

After completion of the repair work, an acceptance certificate is drawn up, by which the object is accepted back. It is signed by members of the selection committee, persons responsible for the safety and repair of the OS, representatives of the contractor and can be drawn up according to the OS-3 form or a free one.

Documents confirming the actual costs of major repairs can be: estimates and technical documentation confirming the volume of repairs and costs for them, certificates of work performed from the repair organization or internal primary records for materials used for repairs, labor, etc.

Find out how to conclude a contract and fill out an acceptance certificate for completed work from the material “Acceptance certificate for completed work - sample for 2021.”

Choosing a method for determining the supplier

The method for placing a construction order depends on the type of work. When choosing a method for conducting a tender for major repairs, consider the following features:

1. Works are purchased through an electronic auction when the main criterion is price.
2. Work is carried out through an electronic competition if the qualifications and experience of the contractor are important.
3. A competition with limited participation in electronic form - if the work requires special qualifications (reconstruction of architectural monuments, etc.) on the basis of clause 1, part 2, art. 56.1 44-FZ.
4. Request for quotations in electronic form and purchase from a single source are used subject to the order limit and volume of purchases that have already been carried out by these methods (clause 2 of article 82.1, clause 4, clause 5, clause 9 of part 1 of article 93 44 -FZ).
5. A request for proposals is carried out if the previous tender did not take place or if part of the terminated contract is being implemented (part 4 of article 55, clause 8 of part 2 of article 83, clause 6 of part 2 of article 83 44-FZ).

Government Order No. 471-r dated March 21, 2016 clarifies whether it is necessary to hold an auction for major road repairs: no, since these works are not on the auction list.

IMPORTANT!

Construction work (OKPD 2 41.2, 42 and 43) are excluded from the auction list, which was approved by government decree No. 471-r dated March 21, 2016.

Results

OS overhaul is a step-by-step production process, each stage of which requires proper documentation.
When carrying out repair activities, it is important to justify the need for repairs, properly hand over and accept the object from repair and timely reflect the operations in accounting. You can find more complete information on the topic in ConsultantPlus. Free trial access to the system for 2 days.

We carry out the calculation of the NMCC

We justify the maximum tender price on the basis of the design and estimate method (Article 22 of Federal Law No. 44), taking into account the requirements of Order No. 841/pr dated December 23, 2019, which presuppose:

1. Mandatory recalculation of prices from the date of drawing up estimates to the date of approval of documentation.
2. Application of deflator indices.