{"id":1385,"date":"2005-07-11T12:26:11","date_gmt":"2005-07-11T08:26:11","guid":{"rendered":"http:\/\/geoeconomics.ge\/en\/?p=1385"},"modified":"2013-03-11T12:26:37","modified_gmt":"2013-03-11T08:26:37","slug":"problems-connected-to-amortization-and-tax-norms","status":"publish","type":"post","link":"http:\/\/geoeconomics.ge\/en\/?p=1385","title":{"rendered":"Problems connected TO amortization and tax norms"},"content":{"rendered":"

Lali Chagelishvili <\/strong><\/p>\n

Georgian tax law article XXV contains a rule on expense deduction and declaration of property loss. There are no rules on amortization expenses meeting international standards. We\u2019ll try to turn your attention to very important issues connected with amortization. <\/p>\n

Amortization (depreciation) is the technique of transforming basic materials into initial value price. The basis of accounting is initial value price of the product and the period of its exploitation.
\n In international practice amortization of basic materials is itemized in bookkeeping. Amortization is an expense not connected with money circulation. Money as a rule is spent on purchase of basic material and not for amortization extra charge. .
\n The property is amortized when in possess of the owner, is utilized to make profit and is amortized following norms and calculation rule stated by tax code to determine deducted money from the profit revenue
\n Amortized property is basic materials and non-material assets. Non material assets are intellectual property right, patent, trade mark, good will, computer program, license, right for lease agreement, franchise, right for natural resource exploration, special right on export and import, no money assets used in the process of production, distribution\/service also for lease agreement or and administrative purposes.
\n Basic materials are material assets based on amortization, used by a person more than 1 year for production distribution\/service, lease agreement or and administrative purposes.
\n Non-material asset expenses are deducted by means of amortization assignment, within the period of utilization in proportion with calculated period. If the period of the utilization of non material assets is not determined, the norm of amortization is determined by tax code article # 183, part 3, group 5 on amortization of basic materials. Nonmaterial assets are grouped separately.
\n The price of non-material assets based on amortization doesn\u2019t include purchase and manufacture prices if they are already deducted when counting profit (revenue).
\n According to the tax code article 183, paragraph 2 \u2013 the following shall not be counted for amortization land, masterpieces, museum exhibit, historical units (but not building, constructions), labor, cattle and other non-amortized assets. Also materials valued up to 1000 Lari are not depreciated and they are fully deducted from the total revenue the accounting year it was purchased or produced.
\n New tax code different from the old one doesn\u2019t cover the special rule of amortization on property transformed into preservation.
\n Tax regulation and book keeping uses initial, restored and remained price regarding basic materials. It\u2019s essential that in book keeping in terms of basic material reevaluation the price for restoration (not initial price) be used to calculate amortization price
\n The evaluation of basic materials should be done regularly as when forming balance sheet its real price mustn\u2019t be different from balance price.
\n The real price of basic materials is the market price after the reevaluation of the unit.
\n When basic materials are reevaluated by means of basis method and other factors (balance price increase or decrease) don\u2019t exist, the unit must be described in terms of remained price when forming the balance sheet. But if the price of basic material is less than its balance price the difference shall be recorded as debit of other operation expense and basic materials in credit.
\n If real price of basic material exceeds balance price while forming balance sheet, the difference will be revenue \u2013 debit – basic materials and credit \u2013 other operational revenue.
\n With the reevaluating of basic materials the reevaluation of depreciation price must be done. This is done by proportional rule, namely the coefficient by the ratio of basic material real price and balance price is multiplied by the price of depreciation.
\n When discounting basic material balance price and its depreciation price, debit will be other operational expenses and depreciation of basic materials, credit will be basic materials (total amount of discount).
\n According to tax account the price of basic materials remains the same by the end of the year. Here we have difference depicted in different amortization assignments.
\n According to international standards of book keeping, amortization norms of depreciation can be different from those norms stated by tax legislation.
\n Following Georgian tax code article 183, item 3 basic materials based on amortization are grouped in accordance with norms of amortization. Specifically, first and second group basic materials with 20 % amortization , third group \u2013 basic materials with 8 % amortization s, fourth group \u2013 5 % amortization, fifth group with 15 % amortization norm.
\n Each group amortization assignment amount is calculated by group balance sheet at the end of the year pursuing the norms of amortization of the present article \u2013 item 3.
\n Buildings and construction amortization will be assigned on each building separately. Each building is discussed as the separate group.
\n The rule of calculating group price balance is given in item 6 of this article. If in economic year the price of group basic material realization exceeds group price balance at the end of the year, the difference will be included in total revenue and group price balance will equal zero.
\n If group price balance is less than 1000 GEL at the end of the year, group balance price is the subject of deduction.
\n If all group basic materials are operated or liquidated, group amount balance price is the subject of deduction from the total revenue at the end of the year.
\n Tax payers have the right, to use accelerated amortization norm on second and third groups, but not double amount indicated in the norm of the item 3.
\n Basic materials received by leasing which is the subject of amortization, are grouped separately following the present article, part 3.
\n In industry units there is always difference in book keeping and deducted price from amortization revenue following observed data for tax regulation. This difference is kept on the account of \u201cdelayed tax assets\u201d and \u201cdelayed profit tax\u201d.
\n E.g. if total is 1000, subject \u2013 1200, than > subject 200 \u2013 GEL compensation will occur in future and we\u2019ll get tax asset.
\n Tax accounting > accounting. Tax accounting \u2013 20 000; accounting \u2013 15 000; in this case delayed tax asset is produced:
\n Debit \u2013 profit tax \u2013 15 000
\n Debit \u2013 delayed tax asset \u2013 5 000
\n Credit \u2013 profit tax to be paid \u2013 20 000
\n If tax accounting < accounting. Tax accounting-1000; accounting \u2013 1200 \u2013 liability has occurred. \n Debit \u2013 profit tax \u2013 1200 \n Credit profit tax to be paid \u2013 1000 \n Credit \u2013 delayed profit tax \u2013 200 \n If there is difference between tax and book keeping data, text payer can make individual accounting according to property unit to be amortized. \n\n<\/p>\n","protected":false},"excerpt":{"rendered":"

Lali Chagelishvili Georgian tax law article XXV contains a rule on expense deduction and declaration of property loss. There are<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[36],"tags":[],"yoast_head":"\nProblems connected TO amortization and tax norms - Geoeconomics<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"http:\/\/geoeconomics.ge\/en\/?p=1385\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Problems connected TO amortization and tax norms - Geoeconomics\" \/>\n<meta name=\"twitter:description\" content=\"Lali Chagelishvili Georgian tax law article XXV contains a rule on expense deduction and declaration of property loss. There are\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\">\n\t<meta name=\"twitter:data1\" content=\"4 minutes\">\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebSite\",\"@id\":\"http:\/\/geoeconomics.ge\/en\/#website\",\"url\":\"http:\/\/geoeconomics.ge\/en\/\",\"name\":\"Geoeconomics\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":\"http:\/\/geoeconomics.ge\/en\/?s={search_term_string}\",\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"http:\/\/geoeconomics.ge\/en\/?p=1385#webpage\",\"url\":\"http:\/\/geoeconomics.ge\/en\/?p=1385\",\"name\":\"Problems connected TO amortization and tax norms - Geoeconomics\",\"isPartOf\":{\"@id\":\"http:\/\/geoeconomics.ge\/en\/#website\"},\"datePublished\":\"2005-07-11T08:26:11+00:00\",\"dateModified\":\"2013-03-11T08:26:37+00:00\",\"author\":{\"@id\":\"http:\/\/geoeconomics.ge\/en\/#\/schema\/person\/c8498c0ae03a66c87b59761fbd19b04c\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"http:\/\/geoeconomics.ge\/en\/?p=1385\"]}]},{\"@type\":\"Person\",\"@id\":\"http:\/\/geoeconomics.ge\/en\/#\/schema\/person\/c8498c0ae03a66c87b59761fbd19b04c\",\"name\":\"Admin\",\"image\":{\"@type\":\"ImageObject\",\"@id\":\"http:\/\/geoeconomics.ge\/en\/#personlogo\",\"inLanguage\":\"en-US\",\"url\":\"http:\/\/2.gravatar.com\/avatar\/bf2d8703d729f003d8905b57fcab5078?s=96&d=mm&r=g\",\"caption\":\"Admin\"}}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","_links":{"self":[{"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=\/wp\/v2\/posts\/1385"}],"collection":[{"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1385"}],"version-history":[{"count":1,"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=\/wp\/v2\/posts\/1385\/revisions"}],"predecessor-version":[{"id":1386,"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=\/wp\/v2\/posts\/1385\/revisions\/1386"}],"wp:attachment":[{"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1385"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1385"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1385"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}