RENEWAL OF FIXED ASSETS IN UKRAINE: PROBLEMS OF THEIR DEPRECIATION AND USE

The generalization of statistics for our state and its comparison with similar indicators of other countries gave grounds for the conclusion about underinvestment of Ukrainian economy. Strengthening investment activity depends on such a tool of the state economic policy as depreciation charges, which through imperative mechanisms of renovation is capable of providing renewal of fixed assets. The research is based on a structural and morphological analysis of analytical and statistical information on depreciation of fixed assets. Two fundamentally different theoretical concepts of the fixed assets depreciation are considered: economic and financial ones. It is indicated that in Ukraine in the accounting and tax normative documents the legal concept of economic depreciation is fixed, which is not based on the needs of reproduction. It is proved that in scientific literature the issues of amortization appointment are considered mainly from the point of focus on the revitalization of investment processes, that is, from the standpoint of the financial concept of depreciation. Historical reason for such a contradiction is revealed: formation of depreciation fund and a special account in a bank during the years of the USSR in the accounting. This gave grounds for considering the resources of the depreciation fund and, accordingly, depreciation deductions as funds that could be used for the technical re-equipment of enterprises. The thesis is based that the restoration of a depreciation fund, similar to the Soviet one, means the withdrawal of a part of the monetary resources from enterprises’ cash and short money instruments. This cannot positively affect the economy of enterprises in a corrupt country. The possibility of introducing a financial concept of depreciation to maximize the use of the depreciation resource for the needs of renewal of fixed assets is considered. A conclusion is made about the need for prior normative-legal support. It is suggested to: (i) find an opportunity to reflect information on unused amounts of depreciation charges in accounting records; (ii) increase the income tax base by including the depreciation amounts that were not used as investments.

Inflation Expectations, Business Taxation And The Incentive To Invest In Depreciable Capital Goods

A parochial issue in business taxation - one which was discussed vigorously during the U.S. 2007-2009 economic contraction is the issue of how corporate Federal income tax policy affects incentives for businesses to undertake new investments in capital goods. This paper focuses on the question of how the tax treatment of depreciation affects the incentives of business to invest in capital goods when businesses (rightly or wrongly) expect significant inflation during the depreciable life of the investment. An innovative idea of adjusting the system of tax depreciation for inflation is to allow an immediate deduction for the present value of the future economic depreciation that firms could claim if there were zero inflation. No adjustment for inflation would ever be needed because the depreciation charge would be taken in the same year in which the asset was purchased. The result of this approach is consistent with the result for inflation-adjusted historical cost depreciation because gains from changes in the relative prices of depreciable assets would be included in income.