Features of formation of debt
Effective financial activities of the enterprise impossible without constant borrowing. their use in turnover due, on the one hand, the objective necessity, namely mismatch in time between revenues and expenses, seasonality of production, implementation of investment projects that require significant amounts of investment for several years. On the other hand, using the leverage provided by the expansion of production and business activities, updating and technical base, the use and effect of financial liverydzhu and others.
Loan capital creates liability company.
Under IAS, the obligation - a debt of the company, arising from past events, the settlement of which is expected to lead to a reduction of enterprise resources, embodying economic benefits.
Fig. 7.7 shown as liabilities and characteristics of their elements. Among the main obligations of loan capital takes place, ie financial obligations. It includes:
- Long-term loan capital - long-term bank loans, long-term borrowings;
- Short-term borrowed capital - short-term bank loans, short-term borrowings, accounts payable, other current liabilities.
Long-term bank loans are usually related to the acquisition of equipment or the execution of investment projects.
The main feature of long-term loans are high risk, more complex service conditions and performance in the form of software. For example, project loans (loans for investment projects) are issued by banks based on deep analysis, business plans and investment projects under the reliable supply. This is the most risky loans. Mortgage loans are secured by real estate and land. Mortgages are the most reliable type of collateral.
Remaining credit outstanding at the end of the year - this is the present value of long-term debt, which is reflected in the balance sheet. Some discrepancies caused by rounding calculation results.
Long-term financial liabilities include debt issued by the company for long-term bond. Bond issuance may be made at the nominal value and the cost of the discount. In this regard, these issues differently reflected in the balance sheet.
If long-term bonds bought at a discount (discount), there are two options for displaying liabilities in the balance sheet. In the first version of the book value of bonds is determined as the difference between the nominal value and the amount of unamortized discounts. The latter book value of bonds is determined by discounting the value of the financial liability for the bonds.
The structure of the company long-term liabilities also include obligations under finance leases (leasing). Leasing can be considered as a complex trade finance and credit operation, acting form of rental machinery and equipment, means of financing investment and lending, as well as by activation of sales activity. Leasing can be treated as a loan, provided in the form of commodities.
Financial lease - a lease agreement, resulting in the conclusion of which property zamortyzuvalosya at least 60%, becomes the property of the lessee or redeemed him for residual value.
The advantages of leasing as a form of credit determined that it allows the lessee to use the property without diverting significant amounts of turnover attributed lease payments on production costs, reduce profits to be taxed. In addition, companies are expanding the possibilities for technical re-equipment of production, especially in an environment where long-term loan to get extremely difficult.
The price paid for the lease covers the full costs of the lessor and provides it in the form of commission income. This may include compensation for the value of the asset, interest on loans, fees and other payments to the lessor if they were provided by the agreement.
An urgent question is the distinction between financial leasing and financial leasing. Object of the lease may be only the property of the lessor, which was acquired by them is to provide leased to others. Leasing differs significantly from the lease. Thus, lessee acting as buyer of ownership - property insurance, repairs and maintenance, while the property owner is the lessor.
Given that there is a major discrepancy between the Law of Ukraine "On Leasing" and Law of Ukraine "On Profit Tax" and "On Value Added Tax", a new draft law "On Amendments to the Law of Ukraine" On Leasing ".
In practice when calculating taxes must use tax lease interpretation and the reflection leasing (rental) operations in the accounting and financial reporting must comply with the PBO number 14 "Rent."
Financial lease - a lease that provides for the transfer of all tenant risks and benefits associated with the right to possess and use the asset. Lease finance is the presence of at least one of the following symptoms:
1) tenant receives ownership of the leased asset at the end of the lease term;
2) the lessee has the option to buy and rent the facility at a price lower than its true value at the acquisition date;
3) The lease term is most of the useful life of the facility lease;
4) the present value of the minimum lease payments from the beginning of the lease term equals or exceeds the fair value of the lease.
In the case of financial leasing the leased asset is reflected in the lessee's balance sheet as assets and liabilities at fair value of the leased property at the inception of the lease or the present value of the gross amount of the minimum lease payments, if it is less than its fair value.
A classic example is a finance lease transaction under which the lessor buys facility lease tenant on request and passes the object at cost. In this case, the acquisition cost of the lease object is not included in gross expenses the landlord and he is not entitled to a tax credit of VAT when buying facility lease. In turn, the landlord does not charge VAT on transmission facility lease, the lease payments and the receipt of the transmission facility lease tenant in the property. The gross income of the lessor is included only the amount of the consideration received (interest). The same amount is included in the gross cost of the tenant.
Among the short-term financing sources of the company holds the largest share of commercial credit. The instrument of commercial credit is a bill that defines the financial obligations of the borrower in respect of the lender. Feature of commercial credit is that its subjects are enterprises, it is provided in the form of commodities, the average cost of commercial credit is lower than the average cost of bank credit. In addition, the benefits include efficiency commercial credit granting, technical simplicity of the transaction, the ability to maneuver working capital. However, be aware that commercial credit has limited capacity in time and size. For lenders, it may be too risky. The negative impact it can make banks because of too high interest rates when discounting bills. The main types of risks that arise in commercial lending include: changes in commodity prices, terms of payment failure to supply the buyer's bankruptcy, the possible rise in loan.
In the commercial activities of each company receives deferred payments from suppliers and provides a delay to its customers. The task of financial management - to find the optimal ratio of accounts receivable and accounts payable. Under these conditions, payables can be a source of funding for the company.
The mechanism of commercial lending, or as it is called, spontaneous funding is considered in detail in Chapter 6.
Use policy discounts for early payment deliveries should bring economic benefits to the supplier, that is, the amount of additional profits from discounts should cover the loss of discounts. Methodology study opportunities for increased profits as a result of acceleration of turnover of working capital due to discounts, consider a specific example.
Thus, spontaneous financing can be considered as a way of loans of the company based on the use of discounts. This does not require a credit support, has a relatively long period for concessional payments.