State of knowlage in the field.

The theoretical and thematic study references

INTRODUCTION

In terms of economic behavior and their material structures, assets are grouped into: 1. tangible 2. intangible assets 3. Financial assets IAS16 Tangible assets are defined as tangible items which is owned by a unit to be used in the production of goods or provision of services to be rented to third parties or used for administrative purposes and can be used over several periods of management. These assets are knows as the tangible assets , tangible or physical assets. Defined by IAS38 Intangible assets (intangible assets) as identifiable assets , monetary , and held without support material for use in the production process or service to be rented to third parties or administrative needs. In terms of area in which it is used, the fixed assets are classified in manufacturing fixed assets, participating directly or indirectly to the production process or operating fixed assets usedfor social marketing. Fixed assets, also known as a non-current asset or as property, plant, and equipment (PP&E), is a term used in accounting for assets and property which cannot easily be converted into cash. This can be compared with current assets such as cash or bank accounts, which are described as liquid assets. In most cases, only tangible assets are referred to as fixed.My paper work will reach the subject of tangible fixed assets referred as fixed assets only. These are items of value which the organization has bought and will use for an extended period of time; fixed assets normally include items such as land and buildings, motor vehicles, furniture, office equipment, computers, fixtures and fittings, and plant and machinery. These often receive favorable tax treatment (depreciation allowance) over short-term assets. According to International Accounting Standard (IAS) 16, Fixed Assets are assets whose future economic benefit is probable to flow into the entity, whose cost can be measured reliably.
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Tangible assets represent assets that: are owned by an entity to be used in the production of goods orprovision of

services, for rental to others or for administrative purposes, and are used for a period exceeding one year

Tangible assets include: land and buildings, technical installations and machinery, other machinery , equipment and furniture, advances tosuppliers of fixed assets tangible and intangible assets in progress. Land and buildings are separable assets and are accounted for separately, even when purchased together. An increase in land value that is a building does not affect the determination of the depreciable valueof the building. A tangible asset should be recognized initially measured at cost or determined under the rules of assessment of these regulations, according to how to enter the body. Where a building is demolished to make way for another , spending demolition are recognized by their nature , without being considered planning costs site.That also applies to accounting treatment of the cost of depreciation value of the building demolished. It is pertinent to note that the cost of a fixed asset is its purchase price, including import duties and other deductible trade discounts and rebates. In addition, cost attributable to bringing and installing the asset in its needed location and the initial estimate of dismantling and removing the item if they are eventually no longer needed on the location. The primary objective of a business entity is to make profit and increase the wealth of its owners. In the attainment of this objective it is required that the management will exercise due care and diligence in applying the basic accounting concept of Matching Concept. Matching concept is simply matching the expenses of a period against the revenues of the same period. The use of assets in the generation of revenue is usually more than a year- that is long term. It is therefore obligatory that in order to accurately determine the net income or profit for a period depreciation is charged on the total value of asset that contributed to the revenue for the period in consideration and charge against the same revenue of the same period. This is essential in the prudent reporting of the net revenue for the entity in the period.

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Net book value of an asset is basically the difference between the historical cost of that asset and it associated depreciation.Apart from the fact that it is enshrined in Standard Accounting Statement (SAS) 3 and IAS 16 that value of asset should be carried at the net book value, it is the best way of consciously presenting the value of assets to the owners of the business and potential investor. How should the changing value of a fixed asset be reflected in a company's accounts? The benefits that a business obtains from a fixed asset extend over several years. For example, a company may use the same piece of production machinery for many years, whereas a company-owned motor car used by a salesman probably has a shorter useful life. By accepting that the life of a fixed asset is limited, the accounts of a business need to recognise the benefits of the fixed asset as it is "consumed" over several years. This consumption of a fixed asset is referred to as depreciation. There are 3 categories od depreciable fixed assets: Property Plant ,animals, means of transport Ecquipment, furniture

What is the Useful Life of a fixed asset? An asset may be seen as having a physical life and an economic life.Most fixed assets suffer physical deterioration through usage and the passage of time. Although care and maintenance succeed in extending the physical life of an asset, typically it will, eventually, reach a condition where the benefits have been exhausted. However, a business may not wish to keep an asset until the end of its physical life. There may be a point when it becomes uneconomic to continue to use the asset even though there is still some physical life left. The economic life of the asset will be determined by such factors as technological progress and changes in demand. For purposes of calculating depreciation, it is the estimated economic life rather than the potential physical life of the fixed asset that is used. What about the Residual Value of a fixed asset? At the end of the useful life of a fixed asset the business will dispose of it and any amounts received from the disposal will represent its residual value. This, again, may be
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difficult to estimate in practice. However, an estimate has to be made. If it is unlikely to be a significant amount, a residual value of zero will be assumed. The cost of a fixed asset less its estimated residual value represents the total amount to be depreciated over its estimated useful life.
Accounts for fixed assets
211 Freehold land and land improvements 2111 Freehold land 2112 Land improvements 212 Buildings 213 Plant and machinery, motor vehicles, animals and plantations 2131 Plant and machinery 2132 Measurement, control and adjustment devices 2133 Motor vehicles 2134 Animals and plantations 214 Fixtures and fittings 281 Depreciation of tangible assets

EVALUATION OF FIXED ASSETS

Fixed assets are assets that generate future economic benefits and held for more than a year. They should be valued at cost or production cost, in compliance with sections 68 and 70 in OMFP 3055/2009.Future economic benefit is the potential to contribute directly or indirectly , the flow of cash or cash equivalents to the entity. Potential can be a productive , as part of the entity's operating activities. How fixed assets are valued, at historical cost or replacement cost? Historical cost gives only the cost at which it was purchased whereas replacement cost gives us the cost that will be incurred to actually purchase the machine in the present year? Fixed assets are valued at cost less depreciation if they put to use regularly, i.e., in the normal course of business. 2. If the asset is acquired in exchange of securities, the Fair Value (FV) securities. If that is not ascertainable, the FV of asset is acquired. 3. If the asset is acquired in exchange of another asset, the FV of the asset given up. If that is not ascertainable, the FV of asset acquired.
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The value of asset-based analysis of a business is equal to the sum of its parts. That is the theory underlying the asset-based approaches to business valuation. The asset approach to business valuation is based on the principle of substitution: no rational investor will pay more for the business assets than the cost of procuring assets of similar economic utility. In contrast to the income-based approaches, which require the valuation professional to make subjective judgments about capitalization or discount rates, the adjusted net book value method is relatively objective. Pursuant to accounting convention, most assets are reported on the books of the subject company at their acquisition value, net of depreciation where applicable. These values must be adjusted to fair market value wherever possible. The value of a companys intangible assets, such as goodwill, is generally impossible to determine apart from the companys overall enterprise value. For this reason, the asset-based approach is not the most probative method of determining the value of going business concerns. In these cases, the assetbased approach yields a result that is probably lesser than the fair market value of the business. In considering an asset-based approach, the valuation professional must consider whether the shareholder whose interest is being valued would have any authority to access the value of the assets directly. Shareholders own shares in a corporation, but not its assets, which are owned by the corporation. A controlling shareholder may have the authority to direct the corporation to sell all or part of the assets it owns and to distribute the proceeds to the shareholder(s). The non-controlling shareholder, however, lacks this authority and cannot access the value of the assets. As a result, the value of a corporation's assets is rarely the most relevant indicator of value to a shareholder who cannot avail himself of that value. Adjusted net book value may be the most relevant standard of value where liquidation is imminent or ongoing; where a company earnings or cash flow are nominal, negative or worth less than its assets; or where net book value is standard in the industry in which the company operates. None of these situations applies to the Company which is the subject of this valuation report. However, the adjusted net book value may be used as a sanity check when compared to other methods of valuation, such as the income and market approaches. How Accountants Value Assets The assets of a firm are measured and reported on in a firms balance sheet. In general, the assets of a firm can be categorized into fixed assets, current assets, intangible assets and

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financial assets. There seem to be three basic principles that underlie how accountants measure asset value:

An Abiding Belief in Book Value as the Best Estimate of Value: Accounting

estimates of asset value begin with the book value, and unless a substantial reason to do otherwise is given, the historical cost is viewed as the best estimate of the value of an asset.

A Distrust of Market or Estimated Value: When a current market value exists

for an asset that is different from the book value, accounting convention seems to view this market value with suspicion. The market price of an asset is often viewed as both much too volatile and easily manipulated to be used as an estimate of value for an asset. This suspicion runs even deeper when values are estimated for an asset based upon expected future cash flows.

It is better to under estimate value than over estimate it: When there is more

than one approach that can be used to value an asset, accounting convention seems to take the view that the more conservative (lower) estimate of value should be used rather than the less conservative (higher) estimate of value. Thus, when both market and book value are available for an asset, accounting rules often require that you use the lesser of the two numbers.
Item Fixed Asets Principales governing measurement Fixed assets refer to tangible assets with long lives. Generally accepted accounting principles in the United States require the valuation of fixed assets at historical costs, adjusted for any estimated loss in value from the aging of these assets. The loss in value is called depreciation. Measurement Issues

The accounting depreciation of an asset follows mechanistic rules straight line (where an equal amount is written off each year) or accelerated. It bears no resemblance to economic depreciation. In the presence of inflation, the use of historical cost can result in significant under valuation of older fixed assets The asset value has little or no relationship to the earning power of the asset.

Tangible assets entails, on one hand, knowledge of the situation of these assets in terms of contribution to the revenue streams generated by the enterprise, and on the other hand,estimating the appropriate methods, depending on the evaluator's position,

observing those assets as operating in or outside exploitation.

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REEVALUATION
In finance, a revaluation of fixed assets is a technique that may be required to accurately describe the true value of the capital goods a business owns. This should be distinguished from planned depreciation, where the recorded decline in value of an asset is tied to its age. Fixed assets are held by an enterprise for the purpose of producing goods or rendering services, as opposed to being held for resale in the normal course of business. For example, machines, buildings, patents or licenses can be fixed assets of a business. The purpose of a revaluation is to bring into the books the fair market value of fixed assets. This may be helpful in order to decide whether to invest in another business. If a company wants to sell one of its assets, it is revalued in preparation for sales negotiations. Reasons for revaluation It is common to see companies revaluing their fixed assets. It is important to make the distinctions between a 'private' revaluation to a 'public' revaluation which is carried out in the financial reports. The purposes are varied: a) To show the true rate of return on capital employed. b) To conserve adequate funds in the business for replacement of fixed assets at the end of their useful lives. Provision for depreciation based on historic cost will show inflated profits and lead to payment of excessive dividends. c) To show the fair market value of assets which have considerably appreciated since their purchase such as land and buildings. d) To negotiate fair price for the assets of the company before merger with or acquisition by another company. e) To enable proper internal reconstruction, and external reconstruction. f) To issue shares to existing shareholders (rights issue) or for an external issue of shares (public issue of shares). g) To get fair market value of assets, in case of sale and leaseback transaction. h) When the company intends to take a loan from banks/financial institutions by mortgaging its fixed assets. Proper revaluation of assets would enable the company to get a higher amount of loan. i) Sale of an individual asset or group of assets.
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j) In financial firms revaluation reserves are required for regulatory reasons. They are included when calculating a firm's funds to give a fairer view of resources. Only a portion of the firm's total funds (usually about 20%) can be loaned or in the hands of any one counterparty at any one time(Large Exposure Regulations). k) To decrease the 'leverage ratio' (the ratio of debt to equity). Under the revaluation model, revaluations should be carried out regularly, so that the carrying amount of an asset does not differ materially from its fair value at the balance sheet date. If an item is revalued, the entire class of assets to which that asset belongs should be revalued. Revalued assets are depreciated in the same way as under the cost model Current market price (CMP) Land values can be estimated by using recent prices for similar plots of land sold in the area. However, certain adjustments will have to be made for the plus and minus points of the land possessed by the company. This may be done with the assistance of brokers and agencies dealing in land, or by a licensed appraiser. Buildings values can be estimated by a realtor (real estate dealer) or Chartered Surveyor (in the UK) in a similar manner to land. Plant & Machinery): The CMP can be obtained from suppliers of the assets concerned. However, with efflux of time, many earlier brands are not available in the market due to closure of companies manufacturing them. Similarly, there is change in the models manufactured by a company from time to time. Comparison of assets to most similar types available for sale, new or used, can provide an estimate of value. CMP of an asset n years old = (CMP of new asset/useful life of asset)*(useful life of asset n). Appraisal Method Under this method, technical experts are called in to carry out a detailed examination of the assets with a view to determining their fair market value. Proper appraisal is necessary when the company is taking out an insurance policy for protection of its fixed assets. It ensures that the fixed assets are neither over-insured nor under-insured. The factors which are considered in determining the value of an asset, are as follows: a) Date of purchase.
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b) Extent of use i.e. single shift, double shift, triple shift. c) Type of asset. Whether the asset is a general purpose or special purpose asset? d) Repairs & Maintenance policy of the enterprise. e) Availability of spares in the future, mainly in the case of imported machines. f) Future demand for the product manufactured by an asset. g) If the asset is part of a bigger fixed asset, the life of the latter is crucial. f) To have the true value for the assets Selective Revaluation and why it should be avoided Selective revaluation can be defined as revaluation of specific assets within a class or all assets within a specific location. A manufacturing company may have its manufacturing facilities spread over different locations. Suppose it decides to undertake a revaluation of its plant & machinery. Selective revaluation will mean revaluing specific assets (such as boiler, heater, central air-conditioning system) at all locations, or revaluing all items of Plant & Machinery at a particular location only. Such revaluation will lead to unrepresentative amounts being shown in the Fixed Assets Register (FAR). In case of revaluation of specific assets of a class, while some assets will be shown at a revalued amount others will be shown at historic cost. The same will happen in case of revaluation of all assets of plant & machinery at a particular location only. It does not sound logical and correct to value fixed assets using different bases. Similarly, depreciation on such assets too will be faulty. Important Points 1. The increase in value of fixed assets because of revaluation of fixed assets is credited to Revaluation Reserve, and is not available for distribution as dividend. Revaluation Reserve is treated as a Capital Reserve. 2. The increase in depreciation arising out of revaluation of fixed assets is debited to

revaluation reserve and the normal depreciation to Profit and Loss account. 3. Selection of the suitable method of revaluation is extremely important. The most

used method is the appraisal method. Methods such as indexation, and reference to current market prices are also used. However, when these methods are used they are crosschecked with the values arrived at by using the appraisal method.

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4.

When any asset, which is revalued, is sold, the part of loss resulting due to

revaluation is debited to the Revaluation Reserve. 5. When assets are revalued, every Balance Sheet shall show for a specified period

of years, the amount of increase / decrease made in respect of each class of assets. Similarly, the increased / decreased value shall be shown in place of the original cost. 6. In case of assets such as land and buildings, revaluation is desirable as their value

increases over time and is carried out every 3 to 5 years. In case of plant & machinery, revaluation is carried out only if there is a strong case for it. In case of assets such as vehicles, furniture & fittings, office equipments etc., revaluation is not carried out. 7. Revaluation should not result in the net book value of an asset exceeding its

recoverable value. 8. Revaluation does not mean only an upward revision in the book values of the

asset. It can also mean a downward revision (also called impairment) in the book values of the assets. However, any downward revision in the book values of the assets is immediately written off to the Profit & Loss account. 9. On upward revaluation of a fixed asset, which has been previously subject to

downward revaluation, the amount of upward revaluation as is equal to the amount expensed previously is credited to the Profit & Loss a/c. Example: Machinery A is purchased on 01-04-1999 for $ 100,000/-. It is depreciated using Straight Line Method at the rate of 10%.
PARTICULARS Nature of Revaluation Date of Revaluation Gross Cost Less: Depreciation Net Book Value Revalued - Appraisal Method First Revaluation downward 01-04-2001 100,000 20,000 80,000 75,000 Second Revaluation upward 01-04-2004 93,750 46,875 46,875 55,000 8,125 0 5,000 3,125

Increase / (Decrease) in Net Book Value (5,000) Debit to Profit & Loss a/c Credit to Profit & Loss a/c Credit to Revaluation Reserve 5,000 0 0

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DEPRECIATION OF FIXED ASSETS Financial Reporting Standard 15 (covering the accounting for tangible fixed assets) defines depreciation as follows: the wearing out, using up, or other reduction in the useful economic life of a tangible fixed asset whether arising from use, effluxion of time or obsolescence through either changes in technology or demand for goods and services produced by the asset. Depreciation is usually spread over the economic useful life of an asset because it is regarded as the cost of an asset absorbed over its useful life. Invariably the depreciation expense is charged against the revenue generated through the use of the asset. The method of depreciation to be adopted is best left for the management to decide in consideration to the peculiarity of the business, prevailing economic condition of the assets and existing accounting guideline and principles as implied in the organizational policies. It is worth noting that not all fixed assets depreciate in value year-over-year. Land and buildings, for example, may often increase in value depending on local real-estate conditions.[1] A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be consumed or converted into cash any sooner than at least one year's time. Fixed assets are sometimes collectively referred to as "plant". Depreciation refers to two very different but related concepts: 1. 2. the decline in value of assets (fair value depreciation), and the allocation of the cost of assets to periods in which the assets are used

(depreciation with the matching principle). The former affects values of businesses and entities. The latter affects net income. Generally the cost is allocated, as depreciation expense, among the periods in which the asset is expected to be used. Such expense is recognized by businesses for financial reporting and tax purposes. Methods of computing depreciation may vary by asset for the same business. Methods and lives may be specified in accounting and/or tax rules in a country. Several standard methods of computing depreciation expense may be used, including fixed percentage, straight line, and declining balance methods. Depreciation expense generally begins when the asset is placed in service. Example: a depreciation expense of 100 per year for 5 years may be recognized for an asset costing 500.
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In determining the profits (net income) from an activity, the receipts from the activity must be reduced by appropriate costs. One such cost is the cost of assets used but not currently consumed in the activity. Such costs must be allocated to the period of use. The cost of an asset so allocated is the difference between the amount paid for the asset and the amount expected to be received upon its disposition. Depreciation is any method of allocating such net cost to those periods expected to benefit from use of the asset. The asset is referred to as a depreciable asset. Depreciation is a method of allocation, not valuation. Any business or income producing activity using tangible assets may incur costs related to those assets. Where the assets produce benefit in future periods, the costs must be deferred rather than treated as a current expense. The business then records depreciation expense as an allocation of such costs for financial reporting. The costs are allocated in a rational and systematic manner as depreciation expense to each period in which the asset is used, beginning when the asset is placed in service. Generally this involves four criteria:

cost of the asset, expected salvage value, also known as residual value of the asset, estimated useful life of the asset, and a method of apportioning the cost over such life.

When a depreciable asset is sold, the business recognizes gain or loss based on net basis of the asset. This net basis is cost less depreciation. Impairment Accounting rules also require that an impairment charge or expense be recognized if the value of assets declines unexpectedly. Such charges are usually nonrecurring, and may relate to any type of asset. an asset is impaired when its carrying amount exceeds its recoverable amount Carrying amount: the amount at which an asset is recognised in the balance sheet after deducting accumulated depreciation and accumulated impairment losses Recoverable amount: the higher of an asset's fair value less costs to sell (sometimes called net selling price) and its value in use Fair value: the amount obtainable from the sale of an asset in an arm's length transaction between knowledgeable, willing parties

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Value in use: the discounted present value of the future cash flows expected to arise from:

the continuing use of an asset, and from its disposal at the end of its useful life

IAS 36 requires impairment testing and, if necessary, recognition for property, plant, and equipment. An item of property, plant, or equipment shall not be carried at more than recoverable amount. Recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. Any claim for compensation from third parties for impairment is included in profit or loss when the claim becomes receivable. Historical cost.Depreciation is generally recognized under historical cost systems of accounting. Historical cost is the original cost of the asset at which it was purchased plus additional costs incurred on the asset to bring it in working condition. Sometimes, the management of the business, if it thinks fit, revalues the asset to present it at current market value. Once the asset is revalued to its market value, then its value has to be constantly monitored to reflect the changes in the market value Gross book value of a fixed asset is its historical cost or other amount substituted for historical cost in the books of account or financial statements. When this amount is shown net of accumulated depreciation,it is termed as net book value. Accumulated depreciation While depreciation expense is recorded on the income statement of a business, its impact is generally recorded in a separate account and disclosed on the balance sheet as accumulated depreciation, under fixed assets, according to most accounting principles. Accumulated depreciation is known as a contra account, because it separately shows a negative amount that is directly associated with another account. Without an accumulated depreciation account on the balance sheet, depreciation expense is usually charged against the relevant asset directly. The values of the fixed assets stated on the balance sheet will decline, even if the business has not invested in or disposed of any assets. The amounts will roughly approximate fair value. Otherwise, depreciation expense is charged against accumulated depreciation. Showing accumulated depreciation separately on the balance sheet has the effect of preserving the historical cost of assets on the balance sheet.
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If there have been no investments or dispositions in fixed assets for the year, then the values of the assets will be the same on the balance sheet for the current and prior year. METHODS OF DEPRECIATION There are several methods for calculating depreciation, generally based on either the passage of time or the level of activity (or use) of the asset. Straight-line depreciation.Straight-line depreciation is the simplest and most-oftenused technique, in which the company estimates the salvage value of the asset at the end of the period during which it will be used to generate revenues (useful life) and will expense a portion of original cost in equal increments over that period. The salvage value is an estimate of the value of the asset at the time it will be sold or disposed of; it may be zero or even negative. Salvage value is also known as scrap value or residual value. Straight-line method:

Book value at the beginning of the first year of depreciation is the original cost of the asset. At any time book value equals original cost minus accumulated depreciation. book value = original cost accumulated depreciation Book value at the end of year becomes book value at the beginning of next year. The asset is depreciated until the book value equals scrap value. If the vehicle were to be sold and the sales price exceeded the depreciated value (net book value) then the excess would be considered a gain and subject to depreciation recapture. In addition, this gain above the depreciated value would be recognized as ordinary income by the tax office. If the sales price is ever less than the book value, the resulting capital loss is tax deductible. If the sale price were ever more than the original book value, then the gain above the original book value is recognized as a capital gain. Declining-balance method (or Reducing balance method).Depreciation methods that provide for a higher depreciation charge in the first year of an asset's life and gradually decreasing charges in subsequent years are called accelerated depreciation methods. This may be a more realistic reflection of an asset's actual expected benefit from the use of the asset: many assets are most useful when they are new. One popular accelerated method is the declining-balance method. Under this method the book value is multiplied by a fixed rate. annual depreciation = depreciation rate * book value at beginning of year
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The most common rate used is double the straight-line rate. For this reason, this technique is referred to as the double-declining-balance method. When using the doubledeclining-balance method, the salvage value is not considered in determining the annual depreciation, but the book value of the asset being depreciated is never brought below its salvage value, regardless of the method used. The process continues until the salvage value or the end of the asset's useful life, is reached. In the last year of depreciation a subtraction might be needed in order to prevent book value from falling below estimated Scrap Value. Since double-declining-balance depreciation does not always depreciate an asset fully by its end of life, some methods also compute a straight-line depreciation each year, and apply the greater of the two. This has the effect of converting from declining-balance depreciation to straight-line depreciation at a midpoint in the asset's life. It is possible to find a rate that would allow for full depreciation by its end of life with the formula: , where N is the estimated life of the asset (for example, in years). Activity depreciation.Activity depreciation methods are not based on time, but on a level of activity. This could be miles driven for a vehicle, or a cycle count for a machine. When the asset is acquired, its life is estimated in terms of this level of activity. Sum-of-years' digits method.Sum-of-years' digits is a depreciation method that results in a more accelerated write-off than straight line, but less than declining-balance method. Under this method annual depreciation is determined by multiplying the Depreciable Cost by a schedule of fractions. depreciable cost = original cost salvage value book value = original cost accumulated depreciation Units-of-production depreciation method.Under the units-of-production method, useful life of the asset is expressed in terms of the total number of units expected to be produced:

Depreciation stops when book value is equal to the Scrap Value of the asset. In the end the sum of accumulated depreciation and scrap value equals to the original cost.
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Units-of-production depreciation method.Under the units-of-production method, useful life of the asset is expressed in terms of the total number of units expected to be produced:

Depreciation stops when book value is equal to the Scrap Value of the asset. In the end the sum of accumulated depreciation and scrap value equals to the original cost. Units of time depreciation.Units of time depreciation is similar to units of production, and is used for depreciation equipment used in mine or natural resource exploration, or cases where the amount the asset is used is not linear year to year. A simple example can be given for construction companies, where some equipment is used only for some specific purpose. Depending on the number of projects, the equipment will be used and depreciation charged accordingly. Group depreciation method.Group depreciation method is used for depreciating multiple-asset accounts using straight-line-depreciation method. Assets must be similar in nature and have approximately the same useful lives. Composite depreciation method.The composite method is applied to a collection of assets that are not similar, and have different service lives. For example, computers and printers are not similar, but both are part of the office equipment. Depreciation on all assets is determined by using the straight-line-depreciation method. Depreciation expense equals the composite depreciation rate times the balance in the asset account (historical cost). Debit depreciation expense and credit accumulated depreciation. When an asset is sold, debit cash for the amount received and credit the asset account for its original cost. Debit the difference between the two to accumulated depreciation. Under the composite method no gain or loss is recognized on the sale of an asset. Theoretically, this makes sense because the gains and losses from assets sold before and after the composite life will average themselves out. To calculate composite depreciation rate, divide depreciation per year by total historical cost. To calculate depreciation expense, multiply the result by the same total historical cost. The result, not surprisingly, will equal to the total depreciation Per Year again.

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Common sense requires depreciation expense to be equal to total depreciation per year, without first dividing and then multiplying total depreciation per year by the same number. Accelerated depreciation refers to any one of several methods by which a company, for 'financial accounting' and/or tax purposes,depreciates a fixed asset in such a way that the amount of depreciation taken each year is higher during the earlier years of an assets life. For financial accounting purposes, accelerated depreciation is generally used when an asset is expected to be much more productive during its early years, so that depreciation expense will more accurately represent how much of an assets usefulness is being used up each year. For financial reporting purposes, the two most popular methods of accelerated depreciation are the declining balance method and the sum-of-the-years digits method. Asset Adjustment and Modifications Asset Management (AM) provides users with the ability to track quantity and cost adjustments to assets. Any financial changes to an asset will have an impact on the

depreciation amount recorded in both the Asset Management and General Ledger modules. The system will maintain the history of adjustments to assets and create accounting entries accordingly. Identify the Need to Enter an Adjustment Asset adjustments may be necessary due to errors during entry or because betterments have been made to existing assets. The Agency Asset Manager will determine when an asset needs to have an adjustment recorded. The following adjustments to an asset can be entered into the system: Add a new cost row. Adjust total cost by percentage or cost amount. Adjust total quantity. Adjust cost or quantity by cost row. Adjust cost for each cost row. Adjust quantity for each cost row. Enter Cost Adjustment The Asset Specialist will be responsible for entering the adjustment transaction in AM using the Cost Adjust/Transfer Asset page to record the transaction. The Specialist will enter

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the new adjustment information for the asset that focuses on one of four actions: addition, adjustment, revaluation and recategorization. An addition indicates that an asset was enhanced in some way. The Specialist will enter the cost, quantity and chartfield information pertaining to the enhancement of the asset. The Specialist has the ability to Adjust All Rows By a fixed percent, quantity, or cost. An adjustment designates that a data entry error may have been made when an asset was created. Revaluation indicates that the value of an asset has changed perhaps because of a change in accounting principles. The Specialist has the ability to adjust the quantity, cost, or cost type with the revaluation selection. Process the Asset.Recategorizing an asset affects depreciation. Because of this, both the depreciation and accounting entry processes will need to be run after the transaction is saved. Review the Adjustment.The Asset Manager will verify the results of the adjustments using the Asset Cost History page to confirm that the adjustment was recorded correctly. Asset acquisitions are initially recorded at their original cost. Although an allowance for depreciation is reflected against most assets, no attempt is made to adjust these historical costs to current market values. This is called the historical cost principle. The failure to adjust fixed assets for changes in market value may, to a certain extent, impair the usefulness of the balance sheet. Recall that the balance sheet attempts to reflect the financial condition of the business by listing the values of the firms assets, liabilities and equity at the end of the accounting period. Most readers of the balance sheet would hope that the values reflected are at least close to current market values. Current market value is the amount that would be realized if the asset were sold. If the values associated with various fixed assets do not reflect current market values, the balance sheet provides a less than accurate portrayal of economic condition. The extent of the balance sheet distortion caused by the historical cost principle depends upon the nature of a firms asset holdings. If the business does not hold many fixed assets or the net depreciated values do not diverge too much from current market values, the distortion will be minimal. However, significant distortions can occur if a business owns a significant amount of real estate.
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Land is never depreciated. However, its current value is likely to deviate significantly from its historical acquisition price. Improved real estate, such as office buildings and warehouses, are depreciated, but their current market values may actually increase over time. So if a business owns significant amounts of real property, the historical cost principle can significantly distort the portrayal of its economic condition. The historical cost principle is applied because accountants believe that distortions of economic condition that involve understatement of asset values are preferable to distortions caused by overstatements.

FIXED ASSETS INDICATORS

Companies rely on their assets, including fixed assets, to generate profits. Modern equipment in good repair, for example, is essential for high productivity and efficiency, and hence for profits. Fixed asset analysis involves calculating the earnings potential, use, and useful life of fixed assets. In addition, fixed asset analysis determines if fixed assets are sufficiently maintained to ensure current and future earning power as well as the relative profitability contributed by fixed assets and fixed asset acquisitions. A decrease in operational efficiency and productivity results from the improper or inadequate maintenance of malfunctioning and inefficient assets as well as from the failure to replace obsolete and irreparable assets. Asset analysis examines the age and condition of each major asset category, as well as the costs of replacing old assets to determine the output levels, downtime, and temporary discontinuances. The measure of efficiency involves the calculation of these ratio:

Fixed asset acquisition to total assets Repairs and maintenance to fixed assets Repairs and maintenance to sales Sales to fixed assets Net income to fixed assets

Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed assets (on the balance sheet). It indicates how well the business is using its fixed assets to generate sales.
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Generally speaking, the higher the ratio, the better, because a high ratio indicates the business has less money tied up in fixed assets for each unit of currency of sales revenue. A declining ratio may indicate that the business is over-invested in plant, equipment, or other fixed assets. Capital asset.The term capital asset has three unrelated technical definitions, and is also used in a variety of non-technical ways.

In financial economics, it refers to any asset used to make money, as opposed

to assets used for personal enjoyment or consumption. This is an important distinction because two people can disagree sharply about the value of personal assets, one person might think a sports car is more valuable than a pickup truck, another person might have the opposite taste. But if an asset is held for the purpose of making money, taste has nothing to do with it, only differences of opinion about how much money the asset will produce. With the further assumption that people agree on the probability distribution of future cash flows, it is possible to have an objective Capital asset pricing model. Even without the assumption of agreement, it is possible to set rational limits on capital asset value.

In governmental accounting, it is defined as any asset used in operations with an

initial useful life extending beyond one reporting period. Generally, government managers have a "stewardship" duty to maintain capital assets under their control. See International Public Sector Accounting Standards for details.

In some income tax systems, gains and losses from capital assets are treated

differently than other income. Sale of non-capital assets, such as inventory or stock of goods held for sale, generally is taxed in the same manner as other income. Capital assets generally include those assets outside the daily scope of business operations, such as investment or personal assets. The United States system defines a capital asset by exclusion. Capital assets include all assets except inventory of supplies or property held for sale (including subdivided real estate), depreciable property used in a business, accounts or notes receivable, certain commodities derivatives and hedging items, and certain copyrights and similar property held by the creator of the property. The United Kingdom has an even broader definition.

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Capital assets should not be confused with the capital a financial institution is required to hold. This capital is computed from the right-hand side of the balance sheet while assets are found on the left-hand side. Return on asset(ROA). An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage.Sometimes this is referred to as return on investment.The formula for return on assets is:

Fixed assets to proprietor's fund ratio establishes the relationship between fixed assets and shareholders funds. The purpose of this ratio is to indicate the percentage of the owner's funds invested in fixed assets.Formula:Fixed Assets to Proprietors Fund = Fixed Assets / Proprietors Fund The fixed assets are considered at their book value and the proprietor's funds consist of the same items as internal equities in the case of debt equity ratio. The ratio of fixed assets to net worth indicates the extent to which shareholder's funds are sunk into the fixed assets. Generally, the purchase of fixed assets should be financed by shareholder's equity including reserves, surpluses and retained earnings. If the ratio is less than 100%, it implies that owners funds are more than fixed assets and a part of the working capital is provide by the shareholders. When the ratio is more than the 100%, it implies that owners funds are not sufficient to finance the fixed assets and the firm has to depend upon outsiders to finance the fixed assets. There is no rule of thumb to interpret this ratio by 60 to 65 percent is considered to be a satisfactory ratio in case of industrial undertakings. Degree of Asset Depreciation is used to directly estimate the age of the fixed asset in percentage terms. Average age in percentage equals accumulated depreciation divided by total tangible assets at year end. It represents the proportion of the assets that have been depreciated: 1) the closer to 100%, the older the asset; 2) the closer to 0%, the newer the asset. A value close to 100% may indicate an out-dated production technology. Should be considered in conjunction with the industry's technological state of the art. Also depends on the company's write-down policy.

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Degree of Asset Depreciation = (Depreciation of Tangible Assets) / (Tangible Assets at Year End) Renewed coefficient of fixed assets this coefficient allowes to assess investment efforts , the investment policy orientation: investment) Renewed coefficient= acquisition value of new fixed assets/Tangible Assets at Year End investments to maintain productive capacity (when new purchasesare the outputs) investment growth, increase production capacity of the company (additional

Cost of Fixed Assets

A fixed asset is a physical item, such as a piece of equipment, a vehicle, or real property. These assets are shown at cost less accumulated depreciation (land is not depreciated). This difference is called book value, which is not necessarily what the asset is worth on the market (fair value). The assigned cost is the acquisition cost plus any expenses of getting the asset to the entity and ready for its intended use. Land would include closing costs, clearing, and grading as well as permanent special assessments, such as pavements,street lights, and sewers. Improvements with a limited life, such as driveways, fences, parking lots, would be charged(debited) to a land improvements account and depreciated over the estimated useful lives. Building would include all construction costs and permits. Building may also include some interest during construction. Adding a cost to an asset is called capitalizing. Capitalized Interest.If an asset is self constructed (built to your specifications), certain interest may be capitalized to the asset rather than expensed during construction. This capitalization continues until the asset is substantially ready for its intended use.The capitalized interest is the lower of the actual interest cost incurred this period or the avoidable interest. Avoidable interest is the amount that could have been avoided by not self constructing this asset. Once interest is capitalized, it is added to the assets cost and is then depreciated over the life of the asset. The cost of an item of fixed asset comprises its purchase price, including import duties and other non-refundable taxes or levies and any directly attributable cost of bringing the asset

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to its working condition for its intended use; any trade discounts and rebates are deducted in arriving at the purchase price. Examples of directly attributable costs are: site preparation; initial delivery and handling costs; installation cost, such as special foundations for plant; and professional fees, for example fees of architects and engineers. The cost of a fixed asset may undergo changes subsequent to its acquisition or construction on account of exchange fluctuations, price adjustments,changes in duties or similar factors. Administration and other general overhead expenses are usually excluded from the cost of fixed assets because they do not relate to a specific fixed asset. However, in some circumstances, such expenses as are specifically attributable to construction of a project or to the acquisition of a fixed asset or bringing it to its working condition, may be included as part of the cost of the construction project or as a part of the cost of the fixed asset. The expenditure incurred on start-up and commissioning of the project,including the expenditure incurred on test runs and experimental production,is usually capitalised as an indirect element of the construction cost. However,the expenditure incurred after the plant has begun commercial production,i.e., production intended for sale or captive consumption, is not capitalised and is treated as revenue expenditure even though the contract may stipulate that the plant will not be finally taken over until after the satisfactory completion If the interval between the date a project is ready to commence commercial production and the date at which commercial production actually begins is prolonged, all expenses incurred during this period are charged to the profit and loss statement. However, the expenditure incurred during this period is also sometimes treated as deferred revenue expenditure to be amortised over a period not exceeding 3 to 5 years after the commencement. Improvement Costs Improvements costs are subsequent costs that are incurred by a business in increasing the earning capability of a non-current asset or the costs incurred that improve the original performance of the asset.

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For costs to be recognised as improvements, they should meet the normal criteria of an asset. Therefore the business incurring the improvement costs should be able to demonstrate that increased future economic benefits will flow into the business as a result. For example, the costs will extend the useful life of the existing asset or will upgrade the asset to improve the quality of products or the customer service experience. Some examples of improvements include installing a new bathroom in a building that did not have one before or replacing singleglazed windows with double-glazed windows. Repairs or Maintenance Costs Repair costs are subsequent costs incurred in restoring an asset to its original state or costs incurred in maintaining assets so that the current earning capabilities are maintained. Some examples of repairs and maintenance include replacing a damaged tire from a vehicle, replacing a broken office or factory window, repainting a building and the costs of maintaining the businesss plant and machinery. Repair costs will also include the costs incurred in diagnosing and cost of professional services incurred in identifying or rectifying the problem being repaired or redressed. Repairs costs that has already been recognized should be added to the carrying amount of the asset only when it is estimated that now when you get further future economic benefits expected from theinitial performance as adequate.An example of this might

be purchasing a building that needs renovation. In this case costs are added to the accounting value of the asset, to the extent that such expenses may be recovered from future use of it. FIXED ASSETS presented in the financial statements To present the state of or the changes in various plant and equipment assets, accountants often prepare financial statements and schedules that plot out this information. These statements include the dispositions of company property, plant, and equipment as well as the acquisitions and divestitures of fixed assets. In preparation of these reports, accountants generally determine the age and condition of the major fixed assets and the replacement cost of them. Provision for a permanent reducing in value of a fixed asset must be made in the profit and loss account and the asset should be disclosed at the reduced amount in the balance sheet. Any such provision should be disclosed on the face of the profit and loss account or by way of

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note. Where a provision becomes no longer necessary, because the conditions giving rise to it have altered, it should be written back, and again disclosed should be made. Fixed assets are purchased to be used for longer period. In the subsequent years, the value of asset could be higher or lower than its present book value due to inflationary condition of the economy.Assets are valued at Historical cost in the books of accountants. Fixed asset expenditures must be capitalized; that is, they are listed as assets on the balance sheet, as opposed to being expensed on the income statement. Fixed assets are considered non-current, and they are listed on the balance sheet at their historical costs. Fixed assets are depreciated over time, and depreciation is an expense that is listed on the income statement. Each period, a fixed asset receives some depreciation writedown until its useful life is used up. The length of time over which a fixed asset is depreciated very roughly approximates its useful life. For example, a computer may be depreciated over five years, while a building may be depreciated over twenty or even as many as forty years. The balance sheet usually lists gross amounts of fixed assets (at historical cost) in categories such as Office Equipment, Vehicles, and Real Estate. The sum of these amounts represents Gross Fixed Assets. Accumulated Depreciation is typically listed next, consisting of the sum of all depreciation expense, past and present. So, on the balance sheet, Gross Fixed Assets less Accumulated Depreciation equals Net Fixed Assets. In notes are found depreciation methods used , the value increases or decreases

resulting from the assessment , estimating the lifetime of the assets , the carrying amount of each of property, plant and equipment that were included in the accounting financial

statements .Accounting policies regarding the estimated costs of restoration related to tangible assets items. Recording the effects of Revaluation of assets.If an asset is revalued at higher cost than its original cost, the excess amount will be treated as profit on revaluation of fixed assets and it is credited to Revaluation Reserve Account. On the other hand, if an asset is revalued at lower cost than its original value, the balance amount will be treated as loss on revaluation of fixed assets and it is shown in the profit & loss account of that year in witch asset was reveled. Derecogniton (Retirements and Disposals).An asset should be removed from the balance sheet on disposal or when it is withdrawn from use and no future economic benefits are expected from its disposal. The gain or loss on disposal is the difference between the proceeds
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and the carrying amount and should be recognised in the income statement. If an entity rents some assets and then ceases to rent them, the assets should be transferred to inventories at their carrying amounts as they become held for sale in the ordinary course of business. IAS 16 &IAS 36 vs. OMFP 3055/2009 Between IAS 16 and OMFP 3055/2009 are a lot of similarities.Eventhough Romanian accounting was very different from the accounting standards that most of the european countries use as a gide .From this point of view,we were isolated,but now because of our integration in the European Community,we slowely, but surely,adjust our ways of keeping the books and because of that our accountind standards shape around the international standards eventhough we keep it with some differences.
Items Depreciatiom method IAS 16 IAS 16 provides 3 types of methods that can be used: straight line method sum-of-years digits method Declining-balance method OMFP 3055

It provides four methods: straight line method Units-of-production depreciation method Declining method Accelerated method Leasing contract of fixed The cost of an asset(fixed asset) held The cost of the asset can be assets by a tenant in a financial lease contract accounted by the owner ither its a is determined based on the financial or operational lease characteristics presentedin IAS 17 contract Tangible IAS 16 presents 7 criteria on witch we 3055 OMPF shows no tangible asset recognition criteria can recognize tangible assets asset recognition criteria mentioned but rather which groups of assets that must be considered by companies Evaluation rules IAS 16 says that, if no active market, in1752 OMPF says that the assets the company may use the models to for which there is no active market determine fair value (ie replacement are estimated at amortized cost. cost model) Residual value It defines residual value as the In 3055 OMPF not define "residual estimated value of the asset at the end value", so it pays full value of of its useful life the assets Depreciation in matters of IAS 16 allowes the deduction of The entire cost of assets is cost residual value deduction (if it can be depreciated estimated reliably ) and discontinuation of depreciation when it exceeds the carrying value.

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Personal contributions. Draft improvement and deepening

My personal contribution is given by an application made in the case of the company DB Schenker-Romtrans, wich is the subsidiary of DB Schenker,a logistic company bu also it provides to the customer with the transportation of the merchandise by all means:land, sea and air. The regional experience within Romania combined with the most efficient land transportation network in Europe is a strong combination. DB Schenker helds the number one position in European Land Transport for years now. Thanks to this unique constellation of DB Schenker and Romtrans your cargo will arrive at its destination exactly at the scheduled time. On the right track ... DB Schenker Romtrans has terminals in Oradea, Curtici, Arad, Timisoara, ClujNapoca, Bucharest, Iasi, Galati and Constanza which all have their own train interconnections. Even the Russian broad gauge is used at Iasi and Galati. These locations will be reinforced to be used for logistics projects for downstream rail transportations.In the year 2008 alone, more than 1 million tons were transported nationally and cross-border by the Romanian DB Schenker subsidiary and Romtrans. ... to the Black Sea The own transshipment terminal in the harbor Constanza on the Black Sea plays a key logistical role for DB Schenker Romtrans. It acts as the interface for shipments between the river Danube and the sea and also happens to be integrated within the Romanianland transportation network. Steel, wood, cereals and project freight belong to the most important transhipment goods in the harbor. Prepared for your logistics needs Optimal logistics processes and flexibility of costs are key-factors in the success of many businesses. Rarely, however, does a logistics provider come with the relevant experience coupled with the required storage capacity to put contract logistics concepts into practice like DB Schenker Romtrans does it two times in Bucharest, Cluj, Arad and Timisoara. The entire warehousing package including all required additional services is now an integral component of

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our service portfolio. Your logistics concepts are drafted by our logistics specialists step by step with you. This cooperation guarantees the successful and reliable implementation of your logistics concepts. DB Schenker stands for the transportation and logistics activities of Deutsche Bahn and has over 91,000 employees in some 130 countries. DBs Transportation and Logistics Division holds top positions worldwide in the industry. The logistics division of DB is the worlds second largest transportation and logistics service provider based on sales and performance. In financial year 2010 the transportation and logistics specialists generated revenues of around 18.9 billion euros, approximately 55 percent of the DB Groups revenues. Through its Transportation and Logistics Division, DB holds top positions in global air and ocean freight and has Europes most extensive land transport network and the rail expertise of Europes largest rail freight company. With around 2,000 locations in the worlds most important economic regions, DBs logistics division has a global network geared toward customer service, quality and sustainability. The transportation and logistics experts offer customers tailored, continuous and cross-carrier door-to-door solutions as well as additional logistics solutions along the entire value-added chain. DB Schenker comprises the DB Schenker Rail and DB Schenker Logistics Business Units. Following the 2010 economic downturn, DB Schenker is once again on the path to growth and success in all areas from rail to contract logistics. Categories of Fixed Assets

12000 licences 21000 land 22000 constructii 23000 equipments 24000 camioane si motestivuitoare 24010 cars 24040 computers 24050 ecipamente de birou 24060 inventories < 1 800 lei
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25000 investment 26000 fixed assets in leasing

These accounts are actually accounts from the german accounting and because of this,the code of each category of fixed assets are german accounts to exist a mutual understanding between both german and Romanian accountants

Development of income

Year to Item Total income Operating income Cost of materials Personnel expenses Other operating expenses Total expenses EBIT Financial result Profit before taxes on income Taxes on income Net profit for the year

31 Dec 09 000 38 370 (3 046) 18 544 10 583 2 723 35 777 2 593 786 1 807 486 1 321

31 Dec 08 000 36 473 (3 219) 17 166 9 913 2 795 33 578 2 895 879 2 016 300 1 716

Change1 % +5.2 (5.4) + 8.0 + 6.8 2.6 + 6.5 10.4 10.6 10.4 + 62 23

Total income rose notably and was driven by the favorable development of revenues.After making adjustments for the major acquisitions, total income rose by 2.1%, or 768 million. Development of revenues, in particular, had a notable effect on the change . Development of other operating income had a reverse impact and, after adjusting for major acquisitions made, was even lower than the comparable same year-ago figure ( 327 million). This is especially due to the lower number of special items during the year under review. Last year this figure still contained extensive effects of 646 million arising from the sale of holdings. Opposite effects were generated by: the sale of our holding in Arcor during the year under review, which led to 243 million in other operating income; and the sale of a holding in

The change is calculated as

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DB Schenker Rail Scandinavia with 13 million, as well as the special item related to the settlement of a conflict with the Frankfurt airport for 56 million. Increases in personnel expenses and the cost of materials reflect, in particular,burdens arising from the wage settlement and the, on average, significantly higher costs for energy. In addition, significant acquisitions made during the year under review also pushed expenses ( 498 million and 361 million, respectively). After being adjusted, cost of materials rose by 5.1% and personnel expenses by 3.1%. Exchange rate effects noted in our international business activities had a dampening impact on expenses in this area. Depreciation taken during the year under review was slightly below the previous years figure, although after adjustments for the major acquisitions made the decline was a bit higher at 4.2%. Other operating expenses noted for the year under review were higher than the previous years level. The 233 million recorded for this item was mainly due to changes arising from major acquisitions made. After being adjusted, they remained at last years level. The dynamic growth of volume sold noted by the domestic air transport segment in the first half of 2009 in comparison to the same year-ago period was dampened by sharply rising prices for aviation fuel and the shrinking economy in the second half.The pace of growth in the low-price airlines segment decelerated significantly as these carriers responded to reduced demand by restricting their offers and decommissioning aircraft. BALANCE SHEET Non-current assets were valued at 42,353 million, or 0.7% ( + 307 million) higher than the value at the end of the previous year (as of December 31, 2009: 42,046 million). Property, plant and equipment remained at 39,976 million (as of December 31, 2009: 38,069 million). The increase was primarily driven by an increase in intangible assets ( +124 million) due to taking over intangible assets and goodwill as part of acquisitions, and the share of investments accounted for using the equity method ( +124 million) due to the addition of the companies to the scope of consolidation and the adjustment of the pro rata equity value. Current assets moved in the opposite direction as their value declined as of December 31, 2008 by 9.9%, or 643 million to 5,840 million (as of December 31, 2009: 6,483 million). This change was driven by the decline in cash and cash equivalents on hand ( 670 million) due to the reduction of financial debt that took place during the year under review,
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lower trade receivables ( 127 million ) especially due to the contraction noted for the DB Schenker Logistics business unit. Structurally, this resulted in a slight shift towards non-current assets. Major changes noted on the equity and liabilities side of the balance sheet during the year under review were changes in equity and financial debt. Mainly due to the profit development equity rose by 11.0 % or by 1,202 million to 12,155 million (as of December 31, 2007: 10,953 million). The equity capital ratio increased correspond - ingly further to 25.2%. Non-current financial debt fell notably by 13.2 % or 2,145 million as of December 31, 2010. Current financial debt moved in the opposite direction and grew by 51.0 % or 936 million. However, total financial debt declined notably.Within the structure of our debt including the Federal Governments interest-free loans shown for infrastructure financing the share of total assets represented by noncurrent liabilities declined correspondingly as of December 31, 2010. In contrast, the percentage of current liabilities increased slightly as of December 31, 2010.

Turnover

Bucharest 13% MOL 1 CT SUD 24% Valea lui Mihai 2% Giurgiu 2% Iasi 3% Constanta 11%

Galati 7% Oradea 8%

Arad 30%

Turnover on different subsidiaries at the level of the country

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Turnover
40000 35000 30000 25000 20000 15000 10000 5000 0 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000

The evolution of turnover throughout the years

Employees
Employees by business unit 2008 2007 Change 31 Dec 09 FTE (FULL-TIME EMPLOYEES) AS OF DEC 31 absolute % DB Bahn Long-Distance DB Bahn Regional DB Bahn Urban DB Schenker Rail DB Schenker Logistics DB Services DB Netze Track DB Netze Stations DB Netze Energy Other DB Group 14 603 25 084 12 259 29 242 074 24 911 40 974 4 509 1 556 25 030 240 242 31 Dec 08

15 011 24 781 12 221 28 067 59 605 26 808 39 780 4 537 1 611 24 657 237 078

The number of employees is calculated on the basis of full-time employee (FTE) positions to permit better comparability within DB Group and over time. Figures for part time employees are converted into figures for equivalent full-time employees in accordance with their share of the normal annual working time. The percentage of employees outside Germany increased again, up to 25 %

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Annual productivity analysis

31 Dec 09 Turnover Number of employees Number of working days Number of working hours

31 Dec 10

33 452mil 34 000mil 240 000 239 900 55 201 840 53 974 800 414 014 000 421 003 440

avg avg avg avg avg

avg

= = = = =
=

230 = 225 = 7.5 = 7.8 = 139 383

= = 606

avg avg = 81 = 80.8 =

= =

= 141 726 = 630

avg avg avg 1.avg 2.avg

= = = avg = (avg = (avg

= =

=141 726 139 383 = 2 343 ) * avg ) * avg (avg = (225 - 230)* 606 = -696 915 =225 * (630 606) = 5 625 ) * avg = 225 * (7.8 7.5) * 81 =

2.1. avg 5 454 2.2. avg 351

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= avg

= avg

(avg

) * avg

= 225 * 7.8 (80.8 - 81) = -

We can observe an increase in average annual productivity by 2 343 lei.The direct factors influenced it differently.Average number of working days has a negative influence on the average annual productivity of 696 915 lei and the average daily productivity increased by 5 625 lei and had a positive impact on the average annual productivity.Also the indirect factors have different influences on the average annual productivity.There is an increase in the average number of working hours of 5 454 lei and a decreas in average hourly productivity of 351 lei that affected average annual productivity in a negative way.The decrease in the average hourly productivity might be caused by the old vehicles that are not able to drive at a higher speed and have functional probles and difficulties and because of this it mightve been delayed often.This would be the explanation and the increase in the average number of working hours,because it would take a higher amount of hours to arrive on its destination than it normally would. Some measures have to be taken into action: A better usage of time per employee A better organization of the work The time should be used effectively and efficiently and this emplies the acquisition of new vehicles tha can be driven faster and have no other functional problems

Salary expences analysis

31 Dec 09 Turnover Number of employees avg Salary expences 33 452mil 240 000 139 383 10 583 mil

31 Dec 10 34 000mil 239 900 141 726 11 115mil

SE

Ne

= avg

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=
= ( ( = 11 115 10 583 = 532 mil lei )* )*

=(239 900 240 000) *139 383 *

= - 4 409 573 lei 179 867

= (141 726 139 383) * 239 900 *

424 lei
( )* =(

) * 239 900 * 141 726 = 340 000 674

We can observe an increase in salary expences with 532 mil lei and this was caused by the direct factors.There is a decrease in the number of employees of 4 409 573 lei and might

happen because of the retirements or leaves or maybe deaths. But the remaining employees work efficiently enough to increase the sales from 33 452 lei to 34 000 mil lei and with this also the average annual productivity by 179 867 424 lei ,this means that the employees are productive. The problem that arises now are the increases in the hourly salary by 340 000 674 lei,changes in salary per hour contributed to the increase of remuneration expences. A normal thing in a company would be that the turnover indicator to be higher than the indicator of remuneration cost,which is not the case in our company and some actions have to be taken in order to improve this situation,because even though a lot of employees left, remuneration cost increased when it shouldve happen otherwise.This might be caused by the change in the salarization policy of the company or might be because of the work donne extra that was caused not intentionatly bu because of the vahicles that are driving too slow and cause delays. APPLICATION

DB Schenker-Romtrans buys in 2007 a generator from Marro Electric System SRL amounted at 124000 lei(including VAT) and also it gives a discount of 4.5%.The company receives the invoice,the generator arrives next month. The company has different subsidiaries within the country.On a regular basis,members of the internal audit teem must travel in order to control the financial statements of its
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subsidiaries ,and they need cars in order to travel faster and cheeper.The company acquired 3 cars amounted 74 400 lei(useful life=5 years,depreciation method = straight line method).Company receives an invoice in advance of 34 400 lei (need an advance payment in order to recive the cars) and in the moment the cars arrive the final invoice is registered . DB Schenker-Romtrans holds a land in Calea Rahovei that in 2008 was evaluated at 2 000 000,but in 2009 the land was reevaluated at 3 000 000 .In 2009,the generator was reevaluated at 400 000 lei (the generator was bought in 2007). In the same year the company goes with financial audit because it is more effective and gives up internal audit.The 3 cars that remain from their temporary owners were sold at the value of 60 000 lei. In 2010 the reevaluation of the generator is of 350 000 lei.In the same year,DB Schenker-Romtrans buys an excavator from SUA and the acquisition expenses were:purchase price=100000$,transport expences=5 000$,setup expences=5 000$,custom lei , VAT 24%,1$=2.4lei The institution accounts for the repairs to its building roof,the invoice being 56000 lei.Also the company provides to its headquarters the instalment throughout the building of double-glazed windows in amount of 500000 DB Schenker-Romtrans buys a crane from its supplier in Italy in amount 40 000.The ransport was made on the route Italy-Romania,the transport expences 7 000 lei.(VAT 24%,1=4.2 lei).It registers the fuel invoice and the invoice of the repairs and maintenance performed by third parties over some old vehicles. At the end of the year, was made an inventory and the following were established: A minus of 20 electric bulbs of 400 lei and they were charged to the guilty expences = 5 000

administrator for the value of 440 lei. Some of the old furniture of 2 000 lei carrying value was disposed of 2 computers were seriously damaged were disposed(they were bought in 2008 at

4 837 lei,useful life= 3 years). RECORDINGS 2007 1.Recording the acquisition of the generator Generator(without VAT)=124 000 *
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= 104 202 lei

Discount = 4.5%* generator (without VAT)=0.0045 *104 202 = 469 lei -generator 104 202 lei -disccount (469)lei

Total acquisition cost = 103 733 lei + VAT = 19%* 103 733 = 19 709 lei Total invoice = 123 442 lei a)invoice recorded % = 404 231 4426 b)discount 231 = 767 469 lei 123 442 lei 103 733 lei 19 709 lei

c)equipment received 213 = 231 103 733 lei

2.Recordings of the cars bought a)Advance payment registered for the cars bought % = 404 409 4426 b) reversal 404 = % 409 4426 c)final invoice % = 404 2133 4426 56 406 lei 47 400 lei 9 006 lei 9 006 lei2 44 030 lei 37 000 lei 7 030 lei 44 030 lei 37 000 lei 7 030 lei

2133 = 4426

For cars VAT is undeductible

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2008 1.The land in Calea Rahovei BVo= 2 000 000 2111 = 462 2009 1.Reevaluation of land in Calea Rahovei As a result from the reevaluation we have an increase in value, than we register asset to reevaluation reserves. BV(2008) < FV(2009) => FV-BV = 3 000 000 -2 000 000 =1 000 000 2111 = 105 1 000 000 2 000 000

2.Reevaluation of the generator bought in 2007 BV(2007) = 100 000 FV(2009) = 400 000 BV < FV => FV- BV = 400 000 100 000 = 300 000

213 = 462

300 000 lei

3.The cars bought in 2007 are now sold a) Sell of the cars 71 000 lei 60 000 lei 11 400 lei

4111 = % 7583 4427

b)Remove from evidence % 6583 281 2010 1.Reevaluation of generator In this case of reevaluation we have a decrease in the value of the asset.Here we have 2 choises to register:
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= 4111

59 520 lei 44 640 lei 14 880 lei

-we have reevaluated the asset in the presios period than we register reevaluation reserve to asset -and in the previos periods we didnt reevaluated the asset so this will be registered expences with impairment losses to asset BV(2009) = 400 000 FV(2010) = 350 000 BV > FV => BV FV = 400 000 350 000 = 50 000 50 000

105 = 213

2.An excavator is bought Purchase price + setup expences 100 000 * 2.4 = 240 000 lei 5 000 * 2.4 = 12 000 lei

+ transport expences 5 000 * 2.4 = 12 000 lei +custom expences Total acquisition cost a)acquisition of equipment 213 = % 404 446 b)VAT record 4426 = 446 51 110 lei 269 000 lei 264 000 lei 5 000 lei 5 000 lei 269 000 lei

2.Repairment of the roof 611 = 401 56 000 lei

3.Instalment of doube-glazed windows Because the instalment of the double-glazed windows increase the value of the building, this will not be registered as an expences but as an asset. This is made accordintly with the previsions of OMFP 3305/ 2009 that states that this kind of installements increase the value of the building. 500 000 * 4.2 = 2 100 000 lei 212 = 404 2 100 000 lei

4.The bought of the crane

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Because both parties are registered for VAT , transport bill is supported by the Romanian company . Delivery made by Italian partner is considered an intra-Community in terms of VAT, which is exempt in Italy. The crane will be recorded as an intra-Community acquisition , the VAT taxation place in Romania. a)acquisition of equipment 40 000 * 4.2 = 168 000 lei 213 = 404 b)VAT 4426=4427 40 320 lei3 168 000 lei

c)Transport expences are supported by Romania % 213 4426 5.Fuel 6012 = 3012 100 000 lei = 404 8 680 lei 7 000 lei 1 680 lei

6.Repair and maintenance of the vehicles

Maintenance and repairs performed by third parties are subject to special categories of expenditure which the accounting is done with synthetic account : 611 "maintenance and repair expenses as: After the economic content is an account of operating costs; accounting function is treated as active accounts; is debited with the amount of maintenance and repair work performed by third parties; is credited at the end by passing the costs on the outcome of the exercise; Is the balance at period end. 611 = 401 7.The inventory In case of disposals we have 2 different situations: -when the asset is fully depreciated and this is registered as expences to asset -and when is not fully depreciated , and we register expences and depreciation to asset
3

78 500 lei

Because it is an intra-Community delivery, Italy is exempt from VAT.

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a)disposal of old furniture 603 = 3032 b)minus in electric bulbs 6028 = 3028 c)administrator charged 4282 = 719 d)disposal of the 2 computers = 1 209 lei 440 lei 400 lei 5 000 lei

% 2814 6583

= 213

4 837 lei 1 209 lei 3 628 lei

8.At the end of the period the expences are transferred to profit and loss account 121 = 611 78 500 lei

Analysis
Year to Item Turnover Fixed Assets Total Assets Net Profit Depreciation Expences FA 31 Dec 09 000 33 452 39 976 48 193 13 210 2 723 21 000 31 Dec 10 000 34 000 40 000 47 303 14 000 2 825 21 590

Analysis of Depreciation expences at 1000 lei Turnover Depreciation rate(d) = Depreciation expences/FA

D2009 =

*100 = 6.8%

The company uses as a depreciation method for all types of fixed assets: straight line method

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D2010 =

*100 = 7.1%

TV * 1000 Depreciation Expences d FA

1 000 = ( 1. TV = ( ( -

= ( ) * 1 000 = 96 81 = 15

)*

) * 1 000 = ) * 1 000 = 93 81 = 12 )*

2.Depreciation Expences = ( 1 000 = ( 2.1.FA =( 1 000 = 92.7 93 = - 0.27 2.2.d = ( 1 000 = 96.2 92.7 = 4 ) * 1 000 = ( ) * 1 000 = 96 93 = 3 ) * 1 000 = ( )*

) *

The direct factors influence in a negative way, depreciation expences at 1000 lei turnover with 15 lei. The increase in turnover with 12 lei leads to an increase in expences.The increase in depreciation expences leads to the unrealize turnover of 3 lei.In order the situation to improve,the turnover must increase faster than depreciation expences => ITV > I DE The indirect factors influence depreciation expences at 1000 lei turnover as it followes: -fixed assets is influencing depreciation expences at 1000 lei turnover in a positive way, with 0.27 leu, but -depreciation rate has a negative influence of 4 lei
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In order to decrease expences we must find what is the reason behind the increase in depreciation expences at 1000 lei turnover.This might be caused by the change in the companys policy, that is changing the depreciation method .Or maybe there are changed the fixed assets with ones that have a higher depreciation expence.

The efficiency of using FA

=( =(

) * 1000 = ( ) *

) * 1000 = (0.35 0.33) * 1000 = 20 =( ) *

* 1000 = (0.53 0.52) * 1.59 * 0.39 * 1000 = 6.2 = ( ) * * 1000 = *( ) *

* 1000 = 0.53 * (1.57 1.59) * 0.39 * 1000 = - 4.1 = ( )* 1000 = ( )

* 1000 = 0.53 * 1.57 * (0.41 0.39) * 1000 = 16.6 We can observe an increase in the profit at 1000 lei fixed assets with 20 leiT.he direct factors have different influences on profit at 1000 lei fixed assets and helps the increase of it. Technological composition has a positive effect of 6.2 lei on the preofit at 1000 lei fixed assets.This is a good thing because this means, there is an increase in the active fixed assets from total of fixed assets.There are more fixed assets that are directly productive and effects the profit in a positive way .The performance of directly productive fixed assets has decreased with 4.13 lei and this means that the active fixed assets are not enough or not used efficiently in order to increase the sales (sales of services ).On long term this will lead to a decrease in in all of the performance indicators.We can observe an increase in profit on turnover of 16.64 lei ,so we can see that according to our sales the company generates profit.This is very good but we need to find out why the active fixed assets are not used efficiently,because it can become a problem when the salles will decrease to bad that the company will register a loss.Maybe the problem behind this is
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that it uses old vehicles that thaey cannot work t its full capacity,that easily it brokens and it needs repairs. Next step will be to analyze the depreciation degree and the renewed coefficient of fixed assets to see how many old vehicles we have (in %) and how many new ones we acquire; in order to take some actions we need first to identify the problem.
5
6

= =

= =

= 7% = 0.06 %

The depreciation degree is not higher but correlated with the renewed coefficient is to high. productive. In this branch we need a lot of productive fixed assets in order to make the bussines work properly and make the clients satisfied and willing to conrtact us. We need new vehicles in order to deliver the clients merchandise on time and in a good condition.We need to make the balance tilt in the favour of the renewed coefficient. Financial Stability = Financial Autonomy = Term Financial Autonomy = General solvency ratio = = = = = = 151% = 49% * 100 = 32.7 % must be higher than in order for fixed assets to be efficient and

= 184%

Capital employed reflect all sources of long-term funding ,so we can see that our financial stability is very good and we can invest in more fixed assets.The financial autonomy ratio is > 33% which reflects a normal situation for the companies that invest in fixed assets rom its own sources and management should improve its financing policy, because it is needed more active fixed assets. Term financial autonomy measure short-term outstanding debt.Correlating this ratio with general solvency ratio we can see that we have enough liquidity to honour our short term debts.From a financial point of view the company stays really good .There are enough resources in order to buy new vehicles.
5 6

FA depreciation degree FA renewed coefficient

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Conclusion
DB Schenker-Romtrans is an afiliate to DB Schenker,an autrich company and they account according with the international standards and because of these they imply to their subsidiaries to account the same,in order to have a common accounting language . In this case according to my application based on this company,they apply IAS 16 Property,plant and equipment and all its provitions ,but it also applies the European regulations.In the matter of an acquisition of an assets from an European country ,member of Eurpean Union ,that country from which I acquired the asset will not register the VAT but the country that bought the asset as long with the transport expences.This is an European Regulation concerning transactions between Intra-Community countries. The depreciation method used is straight-line method for all types of fixed assets.What it concerns the costs related to fixed assets,are registered according to IAS 16.Costs related to repair and maintenance and also costs related to repair that raises the value of the asset because this will be am improvement of the asset that in the future will have an increase of in the economic benefit,are recognized as assets because they increase the original value of the asset . I have donne an economic-financial analysis in order to determine the performance of the company ,its situation and to identify its problems or even the future problems that might occur .Because my paperwork is on fixed assets,I have tried to find out how are the fixed assets in the company,the degree of depreciation,the renewed coefficient,the expences related to depreciation and the efficiency and profitability related to fixrd assets.To see a generat aspect of the companys situation I tried to find out matters about its productivity and expences related to salaries. Somehow al the problems that Ive found when I ve made the analysis,were connected .I think this caused all of the problems in the areas Ive made the analysis.The fact that company uses old vehicles and doesnt buy new ones,even though has enough resources to do so ,made that expences with depreciation and also the expences with salary increases.Even the hourly productivity was effected by it and if it is not taken into into consideration,soon will affect the annual productivity,which will be bad.Their main

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problem is that their old vehicles are not efficient nor productive enough and not for long it will cause major problems,like decrease in profitability and this can bring damages to the company. From way I see it the management is responsible for this situation , they have to acquire more vehicles so that the turnover to increase but also the productivity which is really really low(is positive but low). Generally the company goes very well ,the only problem being with the old vehicles in function and the fact that are not investments in more active fixed assets and from here there are some problems with the decrease in the average hourly productivity ,the increase in the remmuneration expences and in the efficient use of the direct productive fixed asstes .The main problem here is in the financing policy of the company which has to be improved especially when the company can afford it.The company is stable from financial point of view,has enough resources in order to pay on time all of the debts and also has financial autonomy which means that it can invest in fixed assets from its own sources.If all of these are fixed than the company should work smoothly .

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