ArmInfo. Armenia establishes new approaches in assessing the capital and current costs of economic entities. Corresponding changes to the Armenian government's decree of 11 April 2000 were approved by the Cabinet of Ministers on 23 November.
As the Minister of Finance Vardan Aramyan pointed out, the government decision of 2000 defined the concept of "capital expenditures". Meanwhile, during meetings with the private sector, it became clear that this definition is extremely controversial, since the current legal regulation establishes that all those expenses that lead to a change in the state of fixed assets are considered capital expenditures.
According to the minister, it is not completely clear what the definition means. "For example, if we repair some part of the administrative building, does this mean that we are changing the state of the fixed asset - are we carrying out capital expenditures, or is it still ongoing repairs. And this implies various tax liabilities," Aramyan explained, adding that in the first case, the funds are capitalized and depreciated, and current repairs are recognized directly as expenses.
In practice, as Vardan Aramyan noted, this regulation leads to numerous disputes. But, since the policy of the Ministry of Finance is aimed at developing a clear policy and concretizing the norms of administration, the department suggests listening to international accounting and financial reporting standards. Therefore, a more simplified rule is proposed, which states that capital expenditures are all those costs that lead to the replacement of part or component of the state of fixed assets.
In addition, the Ministry of Finance, while improving the standard, also laid quantitative indicators in the project. All those expenses that make up more than 5% of the original value of fixed assets, or the costs in excess of 15% of the initial value of fixed assets, the financial department is proposed to be considered as capital. "In this way, we introduce specifics, and significantly simplify the life of economic entities," concluded the head of the Armenian Ministry of Finance.