Автор: Кутымбай Аршат Абдуохапулы
Accounting for depreciation of fixed assets in Kazakhstan
Introduction
Depreciation of fixed assets is an important element of accounting that plays a key role in financial management and strategic planning. In the current economic conditions of Kazakhstan, especially in light of the 2024 message of President Kassym-Jomart Tokayev, the importance of depreciation accounting is significantly increasing. The President emphasizes the need to improve competitiveness and resource efficiency, which makes optimization of all processes, including depreciation accounting, a priority for domestic enterprises.
Accounting for depreciation allows for the correct reflection of the value of assets on the balance sheet and ensures adequate distribution of expenses over their service life. This is important not only for the accurate display of financial results, but also for liquidity management, which is a critical factor for business stability in a market economy. Correct accounting for depreciation can serve as a basis for financial analysis and planning, as Tarasov (2023) points out.
The key point in accounting for depreciation is the choice of calculation method. In Kazakhstan, the most common are the straight-line method and the declining balance method. The straight-line method assumes an even distribution of the asset’s cost over its useful life, which allows enterprises to plan their expenses. The declining balance method, in turn, assumes greater depreciation at the beginning of the asset’s service life, which can be beneficial for companies actively investing in updating their fixed assets (Smirnov, 2020; Isayev, 2021).
Accounting for depreciation of fixed assets plays an important role in the formation of reliable financial statements and the assessment of the efficiency of asset use. This process includes the distribution of the cost of assets over their useful life, which allows organizations to take into account the decline in the value of assets and plan future costs. Given the current economic realities, including the consequences of global crises and pandemics, the need to review depreciation accounting methods is becoming especially urgent.
According to Romanov (2021), effective depreciation accounting not only improves a company’s financial performance, but also helps optimize tax liabilities. Petrova (2022) points out that the correct application of depreciation methods allows for increased transparency in reporting, which is critical to attracting investors and creditors. In this regard, companies should take into account not only the economic but also the legal aspects of depreciation accounting, which may change under the influence of new legislative initiatives.
One of the most common depreciation methods is the straight-line method. Grigoriev (2023) emphasizes that this method ensures an even distribution of the asset’s cost over its service life and is easy to apply. However, the use of other methods, such as the production or declining balance method, may be more appropriate depending on the specifics of the assets and the nature of their use. In this context, Ivanova (2024) notes that an individual approach to each asset allows for a more accurate assessment of its depreciation and the need for replacement or modernization.
The importance of accounting for depreciation of fixed assets was emphasized in the message of the President of Kazakhstan Tokayev in 2024. In this document, the President emphasizes the need to increase transparency and responsibility in the field of accounting. Nikiforov (2023) notes that adapting accounting policies to new requirements is key to ensuring sustainable business development. This is especially true for small and medium-sized enterprises, which often face difficulties in complying with new accounting standards.
According to research by Kovalev (2022), changes in legislation require companies to regularly review their accounting policies and depreciation methods. Many enterprises, especially small and medium-sized ones, lack qualified accounting personnel and modern accounting software, which leads to calculation errors and inefficient asset management (Sidorova, 2023). In a dynamically changing economic environment, enterprises need to adapt to new requirements to remain competitive.
Digitalization of accounting opens up new horizons for the automation of processes, including depreciation accounting. Fedorov (2024) argues that the introduction of modern technologies can significantly reduce the risk of errors and speed up the reporting process. The use of analytical tools, according to Shevchenko (2022), provides access to real-time data, which allows for more informed management decisions and improved forecasting of depreciation charges.
Adaptation of depreciation accounting to international standards (IFRS) is also becoming an important task for Kazakhstani companies. Lebedev (2023) emphasizes that compliance with international standards not only increases investor confidence, but also improves the overall financial stability of companies. This requires accountants to have deep knowledge of financial reporting and a willingness to continuously learn.
According to research conducted by accounting experts such as Ivashchenko (2021) and Tikhomirov (2023), it is important to consider the specifics of the industry and the nature of the use of assets when choosing a depreciation method. This allows companies to more accurately assess the value of their assets and minimize the risks associated with their depreciation.
Many companies underestimate the impact of depreciation on their financial results. Research by Kulikov (2022) and Sharipov (2021) shows that incorrect accounting of depreciation can lead to deterioration of liquidity and increase in tax liabilities. This is especially relevant in the context of increasing competition in the market and the need to attract investment.
Additionally, it is worth noting that the introduction of modern information technologies and automation of accounting processes are becoming critical to improving efficiency. Lebedeva (2023) emphasizes that enterprises using automated accounting systems achieve significant success in managing their assets and improving the quality of financial reporting. It is also important to consider international experience, which may be useful for Kazakhstani companies seeking to improve their accounting practices (Grigoryeva, 2022).
Given the new economic context, the emphasis on sustainable development and innovation outlined in the President’s message also requires a review of approaches to depreciation accounting. The use of modern accounting methods, such as assessing the environmental sustainability of assets and their impact on business, is becoming relevant for companies seeking to meet global standards.
Thus, accounting for depreciation of fixed assets is a complex and multifaceted process that requires a careful and comprehensive approach. In the context of modern economic realities, when changes occur at high speed, enterprises need to adapt to new challenges in order to remain competitive and efficient.
This article will analyze modern approaches to accounting for depreciation of fixed assets, examine methods and technologies used to improve the efficiency of this process. It will also consider the impact of government initiatives and the President’s message on accounting practices, which will help identify key areas for further development of depreciation accounting in Kazakhstan.
In conclusion, based on the studied material, recommendations will be offered for improving depreciation accounting, which, in turn, should contribute to more efficient management of fixed assets and sustainable development of domestic enterprises. Depreciation accounting not only ensures the financial stability of companies, but also affects their ability to adapt to changing market conditions, which is critical for long-term business success.
Main part
1. Methodology for accounting for depreciation
In Kazakhstan, several methods are used to account for the depreciation of fixed assets. The most common of these are the straight-line method, the declining balance method, and the production use method. The straight-line method, which ensures an even distribution of the asset’s cost over its useful life, allows enterprises to plan expenses. This method is used for assets whose service life is easy to predict, such as office equipment and cars.
The declining balance method is more effective for assets that lose their value faster at the beginning of their service life, such as high-tech equipment and vehicles. It allows you to take into account the specifics of depreciation of such assets, as well as the economic reality when assets require significant investment in repair and maintenance. It is important to correctly determine the service life of the asset and the depreciation rate (Demidova, 2023).
The production utilization method, which is based on the actual use of the asset, is also used in Kazakhstan. For example, for equipment used in the production process, depreciation can be calculated based on the output or hours worked. This allows for a more accurate accounting of the actual condition and use of assets, which becomes important for profitability and efficiency analysis (Rakhimov, 2022).
2. Legislative changes
In recent years, Kazakhstan has been actively implementing reforms in the field of accounting and reporting. The adopted legislative initiatives are aimed at simplifying accounting and increasing the transparency of reporting. The introduction of new accounting standards in accordance with international standards (IFRS) has become an important step in this area. These changes require enterprises to review the methods of calculating depreciation and accounting for assets in general.
According to Nurgalieva’s research (2023), changes in legislation also concern disclosure requirements on depreciation methods and asset service lives. This makes depreciation accounting more transparent and facilitates a better understanding of an enterprise’s financial performance.
The new standards also increase attention to asset valuation and sustainability. For example, companies are required to revalue fixed assets if necessary to reflect their true value, which could lead to significant changes in accounting and taxation (Serikova, 2024).
3. Impact of depreciation on financial results
Accounting for depreciation directly affects taxation, making it an important tax planning tool. Companies can use depreciation deductions to reduce the taxable base, which allows them to reduce tax expenses and increase liquidity. Research by Almukhamedov (2022) shows that proper accounting for depreciation can significantly reduce tax liabilities and improve financial results. This is especially important for small and medium-sized enterprises that have limited resources and are highly dependent on tax pressure.
In addition, proper depreciation accounting allows for more accurate financial reporting, which facilitates informed management decisions. Proper depreciation accounting is the basis for strategic asset management and efficient resource allocation (Kovalchuk, 2021). Depreciation data helps management analyze when and how often assets need to be renewed, which in turn affects budget planning and the company’s financial stability.
4. Current issues and challenges
Despite progress in the field of depreciation accounting, enterprises face a number of problems. Incorrect accounting, insufficient qualifications of accountants and the lack of modern information systems can lead to distortion of financial data. This makes it difficult to make informed management decisions and can affect the financial stability of the company (Sadikov, 2024).
One of the main problems is the lack of awareness of many companies about modern methods and approaches to accounting for depreciation. Outdated practices, such as applying a single depreciation method to all assets, can lead to incorrect financial conclusions and incorrect asset valuation. The need for regular training and professional development of accountants is becoming especially relevant in a rapidly changing economic environment. Despite the importance of accounting for the depreciation of fixed assets, many enterprises face a number of problems that can hinder the effective management of assets and distort financial statements. These problems can be associated with both internal factors and external conditions, including changes in legislation and the economic environment.
One of the main problems is the lack of qualified accounting and finance professionals. Many companies, especially small and medium-sized ones, face difficulties in finding experienced accountants who understand the nuances of depreciation accounting. This leads to calculation errors, incorrect choice of depreciation methods and, as a result, to distortion of financial statements. As Sidorova (2023) emphasizes, the lack of professional training can become a serious obstacle for companies seeking to comply with new legal requirements and international standards.
The second significant problem is the difficulty of choosing the appropriate depreciation method. Current legislation and international standards allow the use of various methods, but not all companies can correctly assess which of them is most suitable for their specifics. As Grigoriev (2023) points out, the wrong choice of method can lead to significant financial losses, since depreciation directly affects taxation and profit.
Frequent changes in legislation also create challenges for accounting for depreciation. Legislative innovations may concern both depreciation methods and documentation and reporting requirements. Kovalev (2022) notes that companies must constantly adapt to new rules, which requires additional resources and time. This may be especially critical for small and medium-sized enterprises that do not have the ability to hire separate teams to monitor changes in legislation.
The lack of modern technology and automated accounting systems is also a significant problem. Many companies still use outdated accounting methods, which complicates the process of calculating depreciation and preparing reports. As Fedorov (2024) points out, automation can significantly improve accounting processes, but this requires investments in new systems and software. For small companies, these costs can be prohibitive, which leads to the preservation of inefficient accounting methods. Another problem is the lack of a clear accounting policy for depreciation. Many companies do not have developed procedures and standards, which leads to differences in approaches to accounting for depreciation within one organization. This can cause confusion and difficulties in interpreting reports. As Lebedev (2023) notes, the presence of a unified accounting policy is an important condition for ensuring the transparency and reliability of financial statements.
The lack of analytical tools for assessing the efficiency of fixed assets is also a problem. Without quality analysis, it is difficult for companies to determine how efficiently assets are used and how quickly they wear out. This can lead to insufficient readiness to replace obsolete equipment and, as a result, to financial losses. Shevchenko (2022) emphasizes that the implementation of analytical systems can help companies more accurately predict depreciation charges and plan asset replacements.
5. Prospects and recommendations
To improve the efficiency of depreciation accounting, it is necessary to introduce modern information technologies and automated systems. This will improve the quality of reporting and increase the level of financial literacy of employees. Regular training for accountants and financial analysts will help update their knowledge and skills, which will contribute to more accurate accounting and analysis (Ergaliev, 2024).
Implementing automated accounting systems can also help integrate data from different sources, allowing for more accurate asset valuation and depreciation. Using analytical tools and software to predict service life and maintenance costs can help companies manage their assets more effectively.
In addition, companies should pay attention to international experience in the field of depreciation accounting. Borrowing best practices can significantly improve internal processes and increase competitiveness. The use of modern methods of accounting and data analysis will be a key factor in the successful management of fixed assets.
Conclusion
Accounting for depreciation of fixed assets in Kazakhstan is a critical aspect of financial management, which has a significant impact on the sustainability and efficiency of enterprises. In light of President Tokayev’s 2024 address, which emphasizes the need for innovative development, increased competitiveness and sustainability of the economy, companies must reconsider their approaches to accounting for depreciation and the introduction of modern technologies.
Correct accounting for depreciation ensures an accurate reflection of the value of assets, which is critical to the formation of fair financial statements. This, in turn, affects the reputation of the enterprise and its ability to attract investment. Errors in accounting for depreciation can lead to serious financial consequences, including deterioration of liquidity, distortion of the tax base and reduced profitability. Therefore, enterprises must carefully select depreciation methods, taking into account the specifics of their assets and the peculiarities of the industry. For example, in manufacturing companies using expensive equipment, optimizing depreciation can be a decisive factor in managing costs and efficiency.
The need to implement modern information technologies and automated accounting systems is becoming more relevant than ever. Such systems allow not only to improve the quality of reporting, but also to reduce the costs of accounting processes, improving their transparency and manageability. In the context of digitalization of the economy, companies that ignore the automation of accounting risk finding themselves at a disadvantage compared to competitors using modern tools to optimize processes.
Regular training of accountants and financial specialists plays a key role in adapting to new requirements and standards. Companies should invest in the professional development of their employees, which will increase their skills and improve the quality of financial analysis and reporting. This also includes mastering international accounting standards, which will help ensure compliance with market requirements and investor expectations.
In addition, companies should consider not only economic but also environmental factors in their accounting practices. The use of methods aimed at assessing the environmental sustainability of assets and their impact on business will be an important step for companies striving for social responsibility and sustainable development. This will not only enhance the company’s image, but also open up new opportunities for attracting investment from stakeholders.
In the future, the priorities for Kazakhstani enterprises should be not only improving depreciation accounting methods, but also introducing practices that meet international standards. Adaptation to changes in legislation, the use of international experience in the field of depreciation accounting, as well as the introduction of innovative technologies and sustainable practices will help create a more transparent and efficient financial system in the country.
Thus, accounting for depreciation is not just a formality, but a strategically important tool that requires careful attention and constant improvement. Enterprises that understand the importance of this aspect and are ready for change will not only succeed in a competitive environment, but also make a significant contribution to the sustainable development of the economy of Kazakhstan as a whole.
Despite the importance of accounting for depreciation of fixed assets, many businesses face a number of problems that can hinder effective asset management and distort financial statements. These problems can be related to both internal factors and external conditions, including changes in legislation and the economic environment.
One of the main problems is the lack of qualified accounting and finance professionals. Many companies, especially small and medium-sized ones, face difficulties in finding experienced accountants who understand the nuances of depreciation accounting. This leads to calculation errors, incorrect choice of depreciation methods and, as a result, to distortion of financial statements. As Sidorova (2023) emphasizes, the lack of professional training can become a serious obstacle for companies seeking to comply with new legal requirements and international standards.
The second significant problem is the difficulty of choosing the appropriate depreciation method. Current legislation and international standards allow the use of various methods, but not all companies can correctly assess which of them is most suitable for their specifics. As Grigoriev (2023) points out, the wrong choice of method can lead to significant financial losses, since depreciation directly affects taxation and profit.
Frequent changes in legislation also create challenges for accounting for depreciation. Legislative innovations may concern both depreciation methods and documentation and reporting requirements. Kovalev (2022) notes that companies must constantly adapt to new rules, which requires additional resources and time. This may be especially critical for small and medium-sized enterprises that do not have the ability to hire separate teams to monitor changes in legislation.
The lack of modern technology and automated accounting systems is also a significant problem. Many companies still use outdated accounting methods, which complicates the process of calculating depreciation and preparing reports. As Fedorov (2024) points out, automation can significantly improve accounting processes, but this requires investments in new systems and software. For small companies, these costs can be prohibitive, which leads to the preservation of inefficient accounting methods. Another problem is the lack of a clear accounting policy for depreciation. Many companies do not have developed procedures and standards, which leads to differences in approaches to accounting for depreciation within one organization. This can cause confusion and difficulties in interpreting reports. As Lebedev (2023) notes, the presence of a unified accounting policy is an important condition for ensuring the transparency and reliability of financial statements.
The lack of analytical tools for assessing the efficiency of fixed assets is also a problem. Without quality analysis, it is difficult for companies to determine how efficiently assets are used and how quickly they wear out. This can lead to insufficient readiness to replace obsolete equipment and, as a result, to financial losses. Shevchenko (2022) emphasizes that the implementation of analytical systems can help companies more accurately predict depreciation charges and plan asset replacements.