TANGIBLE ASSETS VERSUS FIXED ASSETS VERSUS BIOLOGICAL ASSETS Deaconu Sorin-Constantin University 1 Decembrie 1918 Alba Iulia, Address: University 1 Decembrie 1918, 11-13 Nicolae Iorga Street, Alba Iulia, Alba county., Telephone: 0258/806263, ext. 115, e-mail: deaconu_sorin@yahoo.com In this paper the concepts of fixed assets, tangible assets and biological assets are going to be presented. Also, the vision of the Romanian normator as well as the international one regarding the way of recording the previous elements, are presented. There are also discussed some book-keeping aspect specific to agricultural area, with two big components: vegetal production and zoo technical production. Some extracts from the balance sheet in the vision of the Romanian normator and extracts from the balance sheet in the vision of IAS 41 Agriculture are presented. Key words: fixed assets, tangible assets, biological assets. According to the accounting practitioner, the syntagm fixed assets is frequently used. Also the Romanian normator uses this syntagm very often. In exchange, in the vision of the international normator (IASB), the notion of tangible assets is frequently used. In the next lines the visions of the Romanian normator will be referred to. Thus, the order no. 1752/2005, concerning the approval of the accounting regulations in accordance to the European demands, defines tangible assets as assets only if two criteria are met: they are in the property of an entity to be used in the production of goods or providing services, to be lent to third parties or to be used in administrative purposes. they are used during a period longer than a year. The law no. 571/2003 regarding the Fiscal Code with the latest additions and modifications, uses the notion of fixed asset and defines it as any tangible asset which must meet three criteria: it is owned to be used in the production or delivery of goods or in providing services, to be lent to third parties or to be used in administrative purposes; the normal period of utilization must be over a year; the entrance value must be higher than the limit established by the government decision. The Fiscal Code also specifies that the taxable value of the fixed assets is represented by the purchase cost, the production cost or the market value of the fixed assets obtained with a free title or formed as a contribution, to the date of entrance in the tax payer `s property, used to the estimation of the tax depreciation. Although the notion of fixed asset is used in other normative documents such as, the Government Decision 2139/2004 for the approval of the catalogue concerning the classification and the normal length of time of functioning of the fixed assets, published in the Official Gazette number 46/2005. According to this decision, the normal length of time of functioning represents the time of using when from the tax point of view, the value of entrance of the fixed assets is recovered through depreciation. It can be said that the normal time of functioning is lower than the life span of that specific fixed asset. According to the international standard IAS 41 Agriculture is operated by the syntagm of biological assets, which is defined as a living animal or a plant. It can be concluded that the notion of fixed asset is used in the following normative documents: Law 571/2003 concerning the Fiscal Code; The government decision no. 2139/2004 for the approval of the catalogue concerning the classification and the normal lengths of time of functioning of the fixed assets; The government decision no. 1553/2003 concerning the re-evaluation of the tangible asset and the establishment of the value of the fixed assets. This normative document contains even in the title the syntagm of the tangible asset as well as the concept of fixed asset. This is another proof that the Romanian normator does not take into consideration the endorsement of IRFS/IAS. It is mentioned that the international norms use the notion of tangible asset. The decision no. 105/2007 concerning the establishment of the entrance value of the fixed assets. It is mentioned that the present minimum value of entrance in the property of the fixed assets is 1800 RON. The value remained unredeemed of the fixed assets with the entrance value between 1500 and 1800 RON, already existing in the property of the entities, it will be fully recovered to the date of the coming into effect of the Decision number 105/2007 or it can be chosen to recover this value, for the normal functioning time remaining. It can be seen that the Romanian legislator uses the notion of fixed asset in many normative documents, and in the same time the notion of tangible asset is used in legislative norms. Below we present the typology of the animal husbandry and the plants production. 279
The animal husbandry production has animal breeding as a purpose. Animal husbandry is the science that has as an object the knowledge, reproduction, breeding, nutrition, amelioration and exploitation of domestic animals. 1 This branch of agriculture can be categorized as following: The domestic animals group which contains: the breeding of bovines, of porcine, of sheep, of Caprinae, of horses, of birds, of rabbits and of fur animals and also the breeding of other animals; Apiculture- is the branch where the main objects of the work are the bees families; Silkworm breeding (sericulture)- the branch which has as an object the breeding and reproduction of silkworms as to obtain the cocoons dedicated to processing. Aquaculture- the assembly of procedures and techniques having as a purpose the reproduction and/or the breeding of fish and of other aquatic creatures. 2. These contain: pisciculture (fish breeding), alga culture, molluskculture and crustacean breeding. According to the Romanian norms the categories of the bulls are presented in the table below: Table no. 1. Bull Types Category TA/S. Category TA/S. 1. Reproductive bulls TA 7. Young cow with calf TA 2. Working ox TA 8. Young males 12-18 months S. 3. Milking cows TA 9. Young females 12-18 month S. 4. Reformed bulls S. 10. Youth 6-12 months S. 5. Adult bulls to fatten S. 11. Youth 0-6 months S. 6. Male youth over 18 months S TA- tangible assets S. Stocks. According to the Ministry of Finance from the point of view of accounting, the greatest part of the above elements, specific to the agricultural exploitations are presented in the balance sheet in the category of tangible assets. Table no.2. Extract from the balance sheet from 31.12.N (in conformity with the Order of the Minister of Public Finance no. 1752/2005) ELEMENTS No. rd The beginning of the year The end of the year II. INTAGIBLE ASSETS (ct. 201+203+205+2071+208+233+234-280-290-2933) 01 TANGIBLE ASSETS (ct. 211+212+213+214+231+232-281-291-2931) 02 FINANCIAL ASSETS (ct. 261+263+265+267-296) 03 If we make an appeal to IAS 41 Agriculture, the biological assets do not belong to the category of tangible assets (as the Romanian law enjoins), but they are presented in a separate way in the category of the tangible assets. On this ground it will be given an extract from the balance sheet presented in the appendices of IAS 41 Agriculture for an agricultural company of milk production 3 : Table no. 3. Extract from the balance sheet 1 Romanian Academy, Linguistic Institute Iorgu Iordan, Dictionar explicativ al limbii romane-editia a II-a, Publisher Univers Enciclopedic, Bucharest, 1998, p. 1190. 2 Law nr.192/19.04.2001 regarding the fish fond, the fishing and the aquaculture, The Official Gazette no. 627/02.09.2003. 3 We mention that the financial situation made by IAS 41 Agriculture have an illustrative but not compulsory character. 280
(according to IAS 41 Agriculture ) Elements 31 st December 20X1 31 st December 20X0 Assets Dairy cows-immature 52 060 47 730 Dairy cows-mature 372 990 411 840 Subtotal biological assets 425 050 459 570 Tangible assets 1 462 650 1 409 800 Total assets 1 887 700 1 860 370 The plants production represents the breeding and reproduction system of one or more plants, having as a purpose the acquirement of some agricultural products. The subdivisions of the plants production are: the cultivation of the field plants, of grazing fields and hay fields, vegetable growing, fruit growing, wine growing, flower growing, forestry and mushroom growing. Part of the elements of plants production is presented below: The cultivation of field plants - it is the branch where the main work object is the land with herbaceous plants that are cultivated. The structure of field plants cultivation is the next: cereals for grains (wheat, maize, oat etc.), textile plants (flax, cotton, hempen), oil plants (sunflower, rape, soy etc.), plants for other industries (tobacco, sugar beet etc), medicinal plants and flavoured plants (coriander, peppermint, geranium etc), forage plants (Lucerne, clover, bird `s foot trefoil etc.), culture for the production of seeds and seed trees 4 on personal lands (cultures for chive, cabbage seeds etc.) and also plants cultivated on experimental fields; Grazing fields and hay fields culture - it is the branch where the main work object is the land covered by spontaneous herbaceous vegetation. The structure of the grazing fields and hay culture is made of: natural hays, natural grazing fields and cultivated hays; Vegetable growing - it is the branch that concerns the cultivation of vegetables. The vegetables can be categorized as it follows: vegetables for roots (carrot, parsnip, red beet for consummation etc), vegetables for tubers (potato), vegetables for bulbs and fake stem with green leaves (regular onion, garlic, leek) vegetables from the cabbage group (white cabbage for the head, red cabbage, cauliflower etc.), vegetables for the leaves and leaf stalk (spinach, orache, greed lettuce etc.), solace for fruits (tomatoes, peppers etc.), vegetables for pods and capsules (bean and garden peas etc.), cucurbitaceous (cucumber, yellow melon, green melon etc ) flavoured and seasoning vegetables ( drill, thyme etc.) perennial vegetables (horseradish, lovage, asparagus etc.); Fruit growing - it is the branch which concerns the tree culture and fruit bushes culture The trees and the fruit bushes can be categorised as it follows: the group of the pomaceae (apple tree, pear tree, quince tree), drupaceous fruits (plum trees, cherry tree, sour cherry tree, apricot tree, peach tree) nuts (nut tree, hazelnut tree, etc.), berries (gooseberry, blueberry, strawberry, blackberry, raspberry etc), subtropical (orange tree, lemon tree, etc) and tropical fruits (pineapple tree, avocado etc.). The fruit growing patrimony is formed of: fruity trees and bushes, no matter the system of culture, strawberry cultures, fruit tree nursery, including the lands for the crop rotation, the land in preparation for planting and the within the built-up area lands planted with trees, fruit bushes and strawberries.. The fruit growing patrimony is classified as it follows: young plantations, until the entrance of the fruit; plantations in bearing, in full production; plantations in bearing, in decline; fruit growing nurseries; pomological collections, contest cultures and experimental lots and also some lands in preparation for building the plantations. Wine growing - it is the branch which concerns the grapevine culture. In this category there are included: lands in preparation for plantation, fruity grapevine plantations, father plant and cutting plantations, grapevines schools, hop plantations, abandoned wine growing plantations. Flower growing - it is the branch that concerns the cultivation of the decorative plants. According to the morphological characteristics and the usage, the decorative plants can be categorised into: flower decorative plants (hydrangea, corn flag etc.), fruit decorative plants, port decorative plants (snapdragon, climbing roses etc.), decorative plants for decorating gardens and parks, apartment plants etc. Also, the greatest part of the components of the vegetal production, are presented by a Romanian normator in the category of tangible assets. To approve the affirmation an extract from the presentation catalogue of the fixed assets is presented (table no. 4). As an observation it can be said that the agricultural assets are presented in the balance sheet (table no. 5) in the category of stocks. 4 A plant which was not reaped during harvest, in order to collect its seeds. 281
Table no. 4. Extract from the presentation catalogue of the fixed assets approved by G.D. no. 2139/2004 Classification code The name of the fixed assets DNF (years) 2.4.2.1 Apple trees, pear trees, plum trees, mulberries, almond trees, chestnut trees plantations. 2.4.2.2 Cherry trees, sour cherry trees, peach trees, hazelnut trees and apricot trees plantations. 16-24 9-15 2.4.2.3 Nut trees 24-36 2.4.2.4 Gooseberries, currant and jam roses plantations 6-10 Table no. 5. Extract from the balance sheet (in conformity with OMPF no. 1752/2005) ELEMENTS No. rd The beginning of the year The end of the year STOCKS(ct.301+302+ ) It is noticed that in the vision of the Romanian normator the expression of fixed assets is frequently used. The accounting practitioner uses this concept also. At the IASB level the notion of tangible asset is used (IAS 16 tangible assets). It is considered that this notion of fixed asset will not be given up, at least from the point of view of the Romanian normator, although it is spoken frequently about the accounting convergence, conformity, amortisation, IFRS, IAS. Bibliographic References 1. Romanian Academy, Linguistic Institute Iorgu Iordan, Dictionar explicativ al limbii romane-editia a II-a, Univers Enciclopedic edition, Bucharest, 1998, p.1190. 2. The Official Gazette no 108bis/2005, Decree nr. 1752/2005 for the approval of the accounting regulations in conformity with the European orders. 3. The Official Gazette no. 927/2003, Law 571/2003 regarding the Fiscal Code with its modification and later additions. 4. The Official Gazette no. 48/2005, The law of accounting no 82/1991. 5. The Official Gazette no. 103/2007, Decision no. 105/2007 regarding the establishment of entrance value of fixed assets. 282
6. The Official Gazette no. 46/2005, The Government decision no. 2139/2004 for the approval of the Catalogue regarding the classification and the normal length of time of functioning of the fixed assets. 7. The Official Gazette no. 21/2004, The Government decision nr. 1553/2003 regarding the re-evaluation of the tangible assets and the establishment of the entrance value of the fixed assets. 283