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IMPROVEMENT OF ACCOUNTING AND METHODOLOGY IN ORGANIZATION OF
JOINT VENTURES
U.K. Yakubov, PhD in Economics, Assistant Professor Tashkent Financial Institute (Uzbekistan, Tashkent)
DOI:10.24412/2411-0450-2021-4-2-259-263
Abstract. The article describes the organization of accounting in joint ventures on the basis of international standards and the analysis of issues related to its role in attracting investment to Uzbekistan. Based on the results of the analysis, the main sources and directions of investment are projected to increase due to private investment (including public-private partnership). It is based on the fact that the attraction of investments in Uzbekistan depends in many respects on the fact that business entities conduct accounting and reporting in accordance with international standards.
Keywords: branch, consolidation; dividends; profit; losses; assets; passive.
President of the Republic of Uzbekistan Sh. Mirziyoyev said at a video conference on October 19 this year to discuss the parameters of the State Budget for 2021: "... to achieve at least 5.1% growth in the economy in 2021, including 5.8% in industry, 6.5% in services and construction It is necessary," he said [1]. There is a special place for joint activities within the defined tasks.
According to statistics, as of January 1, 2020, there were 398.1 thousand enterprises and organizations operating in the country, of which 10,382 units were established with foreign capital [2]. The share of joint ventures in the structure of entities with foreign capital is 49.2% and has a specific share in the tasks set in the parameters of the State Budget of the country for 2021.
Within the framework of the set tasks, the activities of joint ventures are, firstly, "... the study of the organizational and economic mechanism of investment policy companies formation" [3], secondly, accounting in accordance with international standards, thirdly, "... tax on attracting foreign investment to develop the real sector of the national economy use of privileges ... " [4] becomes a necessary condition."
Analysis of the relevant literature.
The emergence of joint ventures, which is one of the organizational and legal forms of entrepreneurship, is one of the ways to form a multi-sectoral economy. It introduces new methods of management and expands the
relations of enterprises and organizations with foreign partners, while ensuring the internationalization of reproduction. Joint ventures are a form of mixed ownership in which state, public, and private property are generalized. Here the founders can be state enterprises and organizations, collective farms, joint stock companies and public organizations. In addition, some citizens (individuals) have the right to become founders.
International Accounting Standard № 28 "Investments in Affiliates and Joint Ventures" (hereinafter - IFRS 28) sets out the accounting requirements for investments in affiliated businesses and the requirements for accounting for investments in affiliated businesses and joint ventures. Section 3 of this Standard, "Tariffs", defines a joint venture as an agreement on joint activities, in which the parties having joint control over the agreement have rights to the net assets of the agreement [2].
In this regard, the main purpose of the International Financial Reporting Standard №11 "Joint Ventures" (hereinafter - IFRS 11) is to establish the principles of preparation and presentation of financial statements of entities (ie joint ventures) engaged in joint ventures. For this reason, in joint activities, an in-depth knowledge of the aspects that characterize the rights and obligations of the parties is required.
Paragraph 4 of IFRS 11 defines the specifics of a joint venture as defined as "a joint venture is a joint venture between two or more parties". In particular:
- the activities of the parties will be linked by agreement;
- on the basis of the above-mentioned agreement, joint control over the activities between two or more parties shall be established.
Paragraph 6 of IFRS 11 states: "Joint venture is a joint venture agreement or joint venture".
A joint venture agreement is an agreement in which two or more parties have control over the rights and obligations of joint assets. Ajoint venture is a joint venture agreement in which the parties to joint control have the appropriate rights to their net assets (equity).
Joint control - determines that the decision on the relevant activity is approved by a majority of the parties. In joint control, the activity is not managed by a single participant. In joint control, first of all, it is necessary to clarify the form of activity, in particular, the implementation of joint activities or the establishment of a joint venture. According to international accounting standards, this requires knowledge of individual financial statements, investments in associates and joint ventures, business associations, consolidated financial statements, the methodological basis of joint venture agreements, and other specific requirements.
Analysis and main results.
According to the results of the analysis, IFRS 10 "Consolidated Financial Statements" sets out a number of methods for consolidating financial statements, including:
1. Consolidated financial statements;
2. Interests are combined;
3. Combined with purchase;
4. Merge in a share method [9].
In the consolidated reporting method, under the general control of the individual, the amounts in the relevant indicators are aggregated and compiled on the basis of internal transactions.
Although the method of consolidation of interests is similar to the method of consolidated reporting, they have their own
peculiarities, namely: if today the consolidated report is not used under IFRS, the application of the method of consolidation of interests in IFRS consolidated reporting has been abolished; this method was widely used until 2003, creating monopoly economic entities.
The procurement method has been used in practice since 2004, and its specific features are:
- Increases the comparability of reports of different firms;
- Increases the quality and accuracy of the report;
- Prevents the structure of the report in different ways;
- Any illegal actions will be prevented.
IFRS 28, Section 3, "Tariffs", states that
"Significant impact is the degree to which the parties participate in decisions on the financial and operating policies of an investment object and is not an activity control or joint control". It should be noted that if the parent controls subsidiaries, IFRS 28 regulates the activities of an entity in which the investor has significant influence over the entity or owns an unequal portion of the controlling interest in the second entity.
Significant effects can be direct or indirect. If the parties have 20 percent or more of the voting rights in the investment object, such business entity is considered to have a significant influence or vice versa.
It should be noted that according to International Financial Reporting Standards, retained earnings or losses of an entity are determined based on the growth of net assets and not on the indicators reflected in the income statement.
The methodology of compiling the consolidated balance sheet does not change, regardless of the financial result of the joint-stock company at the end of the reporting period. However, it should be noted that due to the loss incurred during the reporting period, it is advisable to offset the part of the investment made by the other party in a certain unit in the off-balance sheet account "Provision of liabilities and payments -received (008)". This is because, in accordance with paragraphs 29-30 of IFRS 28, if an investor's share is to be accounted
for as a financial result of the invested entity, the entity shall cease to account for its share of the losses incurred in subsequent periods [7].
When a joint-stock company makes a profit in the next reporting period, the amount of unrecognized losses on the previous period, ie the funds on the off-balance sheet account, must be reimbursed. In this case, the invested joint-stock company must fully or partially cover the obligations of the affected enterprise to third parties.
An entity ceases to use this method when it loses significant control over its investment activities and the amount of the investment is recognized as a financial asset at initial cost in accordance with International Accounting Standard 39, Financial Instruments: Recognition and Valuation.
The following indicators are adjusted when the parties involved in the equity method sell mutual products (works, services):
- financial investments;
- deferred income tax;
- consolidated retained earnings;
- net income, cost of goods sold (works, services), loss of long-term assets;
- tax in favor of the investor;
- investor's net profit for the reporting period.
The following conclusions were drawn using IFRS 28 on the improvement of accounting and its methodology in the establishment of joint ventures [7]:
- the accuracy of the data in the financial statements prepared on the basis of IFRS 28 is higher than in IFRS 27;
- Losses are not recognized in subsidiaries due to the fact that they exceed the initial value of investments.
The joint venture will have proportional control over other reporting entities, unlike subsidiaries and affiliates. Otherwise, the investment is accounted for in a nonsignificant or equity manner.
Under the terms of the contract:
- the general manager is appointed for joint activities and supervises the joint venture within the requirements established by the contract;
- activities, duration of joint activities and obligations;
- Board of Directors or other body managing joint activities, the right to vote of entrepreneurs;
- funds invested in joint activities;
- the distribution of production volume, income, expenses or results of joint activities between the parties is determined, and financial statements are prepared on the basis of the method of proportional consolidation.
The method of proportional consolidation differs from the general method of consolidation in that the parties are formed in two different ways, reflecting their share in assets, liabilities, income and expenses: In the first form, the business entity directly aggregates the relevant indicators in assets, liabilities, income and expenses; in the second form, the entity accumulates certain items in its assets, liabilities, income and expenses that relate to its assets.
It should be noted that the consolidated financial statements of joint ventures are:
- if the entrepreneur intends to sell shares in the joint venture;
- the joint venture operates under strict conditions;
- does not apply if the joint venture has become a subsidiary of the entrepreneur.
As long as the assets are part of the joint venture, the adjustment of retained earnings is governed by the joint venture report and does not take into account the direction of sales.
Conclusions and suggestions.
The fact that an investor has significant or majority ownership in an investment object does not mean that it prevents the business entity from having a significant influence. This is because a reporting entity that owns 100% of the shares may not control the activities of the investment entity. This is because shares can be purchased for a number of purposes, such as making a profit or terminating a competing business.
A specific aspect of the equity method is that an investment in a subsidiary or joint venture is recognized at cost and its carrying amount increases or decreases after the acquisition date when the investor's share of the investment's profit or loss is recognized.
The specific aspect of consolidated consolidated reporting is that it does not control other reporting participants and,
conversely, is used in activities where participants do not report to it. Because its participants will have an asset, a share, which has a significant impact, in particular, 20-50 percent of the shares. The other methods are valid only if the parent organization and its subsidiary are enterprises. This method is also used by joint ventures.
The method of equity participation in private capital is not used in the following cases:
1. The attracted investment object is intended for sale for a short period of time (within 12 months), if the work in this direction is carried out rapidly;
2. In accordance with the relevant requirements of the International Accounting Standard №27 "Separate financial statements":
2.1. An investor is a subsidiary that is fully or partially controlled by another entity and has no objection by the parent to its non-participation in equity;
2.2. Debt or equity instruments of the business entity are not traded on the open market (domestic or foreign stock exchange or over-the-counter market, including local and regional markets);
2.3. If the business entity has not submitted or is not in the process of submitting its financial statements to other
regulatory bodies, such as the Securities Committee, for the purpose of issuing instruments on the open market;
2.4. The method of equity participation is not used as an exception if the parent publishes consolidated financial statements for public use in accordance with International Financial Reporting Standards [6].
It should be noted that there are 3 types of joint activities: joint asset management; implementation of joint transactions; all the establishment of a new business entity (joint venture) is governed by the terms of the contract in writing. Without an agreement, there can be no joint action in accordance with the relevant international financial reporting standard.
If the loss incurred during the reporting period is intended to reduce the investment made by the other party to a certain unit, it is advisable for the reporting joint-stock company to record it in the off-balance sheet account "Provision of liabilities and payments - received (008)". This is because, in accordance with paragraphs 29-30 of IFRS 28, if an investor's share is accounted for as a result of the financial performance of the invested entity, the entity is required to cease to account for its share of the losses incurred in subsequent periods.
References
1. Speech by the President of the Republic of Uzbekistan Sh. Mirziyoyev at a video conference dedicated to the discussion of the parameters of the State Budget for 2021 on 19 October this year. People's Word newspaper, October 20, 2020, 20220 (7722).
2. Averchev I.V. IFRS-2012. Comments and application practice. Appendix to the journal "Accounting". - №11. - 2012. - M.: Editorial office of the journal "Accounting", 2012. - Part 1. 552 p.
3. Astanakulov, O.T., Kuchkovskaya, N.V., Bataeva, P.S., Khokhlova, N.I., Calesci, M. Providing innovative processes in the economic development of the Russian Regions.2019. Academy of Entrepreneurship Journal 25(4), P. 1-9
4. Umarov, B.S. "Tax benefits for stimulations of foreign investments in real economy of Uzbekistan". Finance India 2018. 32(2), P. 537-546.
5. International Accounting Standard 27 - "Separate financial statements".
6. International Accounting Standard 28 - "Investments in affiliated businesses and joint ventures".
7. IFRS 3 - "Business Associations".
8. IFRS 10 - "Consolidated Financial Statements".
9. IFRS 11 - Joint Venture Agreement.
СОВЕРШЕНСТВОВАНИЕ БУХГАЛТЕРСКОГО УЧЕТА И МЕТОДОЛОГИИ ПРИ ОРГАНИЗАЦИИ СОВМЕСТНЫХ ПРЕДПРИЯТИЙ
У.К. Якубов, канд. экон. наук, доцент Ташкентский финансовый институт (Узбекистан, г. Ташкент)
Аннотация. В данной статье описана организация бухгалтерского учета в совместных предприятиях на основе международных стандартов и проанализированы вопросы, связанные с его ролью в привлечении инвестиций в Узбекистан. По результатам анализа прогнозируется увеличение основных источников и направлений инвестиций за счет частных инвестиций (в том числе государственно-частного партнерства). Привлечение инвестиций в Узбекистан во многом связано с тем, что хозяйствующие субъекты ведут бухгалтерский учет и отчетность в соответствии с международными стандартами.
Ключевые слова: филиал, консолидация; дивиденды; прибыль; убытки; актив; пассив.
