Role of the analysis of property, plant and equipment in reproduction process

Keyword. Fixed assets, reproduction of fixed assets, the system of evaluation indicators, analysis, dynamics, financial stability.

The role of property, plant and equipment, their effective use at the different economic relations is always important. It is caused by the fact that the main source of profit of any enterprise, a national wealth of the country skillful, reasonable rather complete use of property, plant and equipment, with their timely modernization and updating is. In combination with the human labor developed by management at the different production rates and marketing the maximum efficiency of use of property, plant and equipment of production enterprises is reached.

The relevance of this subject is that the integral condition of implementation of business activities is providing the organization, along with material, labor, financial resources, and necessary fixed asset objects.

Development of scientific and technical progress is expressed not only in strengthening release of the latest high-performance equipment and modern equipment which possibility of acquisition at many enterprises is absent, but also in improvement of use of the available property, plant and equipment.

In IFRS 16 "Property, plant and equipment" the following definition property, plant and equipment is given - it is tangible assets which:

• -    are held for use in a production process or deliveries of goods and a rendering of services, when leasing or in the administrative purposes;

• -    are assumed to use during more than one accounting period [1].

Property, plant and equipment uses during many production cycles, they indirectly wear out, keeping property and a form, gradually transfer the cost to a newly created product.

Criteria when the fixed asset object is recognized as an asset:

• - future economic benefits;

• - cost value of an asset for the enterprise can be reliable is estimated.

The production process is performed with the participation of means of production which are subdivided on:

• -    objects of the labor (raw materials, materials, purchased semi-finished products);

• -    labor instruments (machines, machines, etc.) [2].

Depending on purpose and the carried-out functions property, plant and equipment of the «Ekslyuziv Mebel» enterprise is divided into the following groups: earth, buildings and constructions, machines and equipment, transfer and vehicles.

Models of fixed asset accounting and order of their assessment.

Distinguish the concepts "fixed assets" and "property, plant and equipment". The Property, Plant and Equipment (P, PE) is the money invested in fixed assets.

Fixed assets – the part of property used as labor instruments at production, performance of works or rendering services or for management of the organization during the period exceeding 12 months.

Process of reproduction of fixed assets and, therefore, their loudspeakers and the movements of fixed capital is estimated on the system of indicators: to a pure gain for a certain period, or to leaving, coefficient of updating or wear of fixed assets, etc. A basis of calculations is determination of annual average cost of fixed assets. It is defined (Fcr) as private from division of a half of cost of fixed assets for the beginning of year (Fn), complete sizes for the beginning of each next quarter (F2+F3+F4) and half of her size on the end of the year (Fk) on 4 (the number of quarters in a year) (formula (1)):

^ + F2 + F3 + F4 + у p   _—______________________—_

“          4                (1)

This indicator is used also when calculating (capital productivity, the property tax of the enterprises, etc.) and at a research of dynamics of fixed assets of property, plant and equipment) the enterprises.

In the course of the analysis are studied dynamics of the listed indicators, accomplishment of the plan for their level, intereconomic comparisons are carried out. The generalizing products indicators characterizing the level of security of the enterprise with fixed assets are a work fondovooruzhennost.

Classification for the purposes of a financial reporting preparation of «Ekslyuziv Mebel» applies the following classification by groups: earth, buildings and constructions, machines and equipment, vehicles, other property, plant and equipment (office equipment, furniture, tool, production stock and accessories).

«Ekslyuziv Mebel» offers the buyers furniture of various design (from classics to a modernist style) wide color range - more than 80 coloring.

The buyer can always choose furniture of different color depending on the preferences and wishes.

Distinctive feature of products which are turned out by the «Ekslyuziv Mebel» organization is the wide range of all types case (and shortly also soft) furniture.

The design of furniture is always relevant, the ratio price/quality of furniture of TOO "Ekslyuziv Mebel" considerably is ahead of competitors.

I released «Ekslyuziv Mebel» for 2016 products in the current prices on the amount 27415 thousand tenges, growth rates were 126,07%, proceeds from sales of products made 5996 thousand tenges., growth rates of 115,4% (Table 1).

The table 1- General technical and economic indicators of «Ekslyuziv

Mebel» for 2015-2016.

№	Indicators	2015	2016	Deviations, (+,-)	Growth rate, %
1	A production volume in the current prices, one thousand tenges	21746	27415	+5669	126,07
2	A production volume in the comparable prices, one thousand tenges	26618	27754	+1135	104,26
3	Proceeds from sales of products (net), one thousand tenges.	38846	44842	+5996	115,4
4	Production costs and product sales, one thousand tenges	38687	45675	+6988	118,1
5	A net profit from product sales, one thousand tenges.	2704	2399	-305	88,7
6	Gross profit, one thousand tenges.	1164	544	-620	46,7
7	Annual average cost of the fixed business assets, one thousand tenges	50350	65053	+14703	129,2
8	Material costs, one thousand tenges	24171	25928	+1757	107,3
9	Average number of employees of the enterprise, people	336	333	-3	99,1
10	Capital productivity of OPF, tenge(p. 1/p. 7)	0,432	0,421	-0,011	97,5
11	Materialootdach, tenge (p. 1/p. 8)	0,9	1,057	+0.157	117,4
12	Annual performance of one worker, one thousand tenges average(p. 2/p. 9)	79,2	83,3	+4,1	105,2
13	Profitability of a goods sold, % (p. 5/p. 4) h100	7	5,2	-1,8	74,3
14	Profitability of sales, % (p. 5/p. 3) h100	7	5,3	-1,7	75,7
Note- the table is made on the basis of a source				[7]

Estimating technical and economic indicators of «Ekslyuziv Mebel» for 2015-2016 it is possible to note the next moments: the production volume in the current prices in reporting year, in comparison with previous, grew by 1,26 times; production costs and product sales - by 1,18 times.

In reporting year profit on product sales decreased by 305 thousand tenges and made 2399 thousand tenges. The number of employees of the enterprise decreased in comparison with previous year on 3 persons. In reporting year in comparison with basic the materialotdacha increased, and the capital productivity and indicators of profitability decreased. Annual average performance of one worker in reporting year increased by 1,07 thousand tenges and was 8,32 thousand tenges.

We will carry out solvency analysis of the enterprise on the basis of liquidity indicators of balance (Table 2).

The table 2-Measure Calculation of Solvency of «Ekslyuziv Mebel» for

2015-2016.

Indicators	2015		2016		Changes (+,-)
	Measure calculation	Indicator Level	Measure calculation	Indicator Level
Current assets:		11806		18490	+6684
- Money		83		133	+50
The short-term capital investments		-		-	-
- Stocks		9975		14490	+4515
- Current taxes		339		461	+122
- Short-term accounts receivable		1352		3241	+1889
- Other current assets		57		165	+108
Current liabilities		6567		9600	+3033
Borrowings		848		2155	+1307
Accounts payable		6095		8795	+2700
Deferred revenues		-		-	-
Funds of consumption		-410		-1350	-940
Reserves of the forthcoming expenses and payments		34		-	-
Other current liabilities		-		-	-
Solvency indicators:
Coefficient of current liquidity	11806/6567	1,80	18490/9600	1,92	+0,12
Coefficient of critical liquidity	83+1352/6567	0,22	133+3241/9600	0,35	+0,13
Absolute liquidity index	83/6567	0,012	133/9600	0,013	+0,001
Note – the table is made on the basis of a source [7]

Having analyzed these tables 2 it is possible to see the insignificant growth of all indicators of solvency that is the positive moment at the enterprise [4].

We investigate structure, structure and dynamics of property of the «Ekslyuziv Mebel» enterprise for 2015-2016. (Table 3).

Table 3-Basic data for assessment of structure, structure and dynamics of property of «Ekslyuziv Mebel» for 2015-2016.

Indicators	2015		2016		Changes in a year		Growth rate, %
	Amount, one thousand tenges	Ud. weight, %	Amount, one thousand tenges	Ud. weight, %	Amount, one thousand tenges	Ud. weight, %
Asset cost, including:	50542	100	65114	100	+14572	-	128,83
Non-current assets	28621	56,63	31836	48,89	+3215	-7,74	111,23
Money and short-term financial investments	83	0,16	133	0,21	+50	+0,05	160,24
Short-term accounts receivable	11806	23,36	18490	28,40	+6684	+5,04	156,62
Stocks	9975	19,74	14490	22,25	+4515	+2,51	145,26
Other current assets	57	0,11	165	0,25	+108	+0,14	289,47

Note – the table is made on the basis of a source [6]

From table 3 it is visible that the total amount of enterprise assets in 2016 in comparison with 2015 increased by 14572 thousand tenges or 1,28 times. In the general capital structure of the enterprise there were minor changes, so the specific weight of fixed capital in 2016 in comparison with 2015 was lost on 7,74 items. But nevertheless the amount of fixed capital still exceeds the amount of working capital (in 2016 – for 13346 thousand tenges).

Carrying out the analysis of the key technical and economic indicators of the enterprise, we will carry out also the analysis of financial stability of the enterprise (Table 4).

Table 4-Dynamics of Absolute Measures of Financial Stability of the

«Ekslyuziv Mebel» Enterprise

Indicators	2015	2016	Deviations, (+, -)
1. Equity (own means)	29114	33827	+4713
2. Long-term loan capital	848	2155	+1307
3. Short-term loan capital	3671	5928	+2257
4. Total current assets	28621	31836	+3215
5. Availability of own means for stock forming	+493	+1991	+1498
6. Availability of own and long-term borrowings for stock forming	-355	+4146	+4501
7. Availability of own long-term and short-term borrowings for stock forming	3316	10074	+6758
8. Stocks	9975	14490	+4515
9.          Security of stocks with own means	-9482	-12499	-21981
10. Security of stocks with own and long-term borrowings	-10330	-10344	-20674
11. Security of stocks with a total amount of means	-6659	-4416	-11075
Note – the table is made on the basis of a source

Table 4 allows to estimate a financial condition of «Ekslyuziv Mebel» as unstable, i.e. failures in a financial system of the enterprise, violation of solvency are possible.

At the «Ekslyuziv Mebel» enterprise the catastrophic lack of funds for stock forming is observed in spite of the fact that in 2016 in comparison with 2015 the amount of the short-term loan capital increased by 2257 thousand tenges

Also for assessment of financial stability of the enterprise we will calculate the following coefficients:

• 1)    The coefficient of autonomy is defined as the relation of the amount of own enterprise assets to property value of the enterprise:

К 2015 = 29114: 50542=0,6;

К 2016 = 33827: 65114=0,52

The value of this indicator shows what part of property is created at the expense of an equity of the organization, i.e. belongs to owners. Growth of an indicator in dynamics is a positive factor. The normal minimum measure value To is estimated at the level of 0,5.

• 2)    The coefficient of a ratio loan and an equity is defined by division of size of the loan capital into the size of sources of own means:

К 2015 = 848: 29114=0,29;

К 2016 = 2155: 33827=0,06.

This coefficient characterizes dependence on the loan capital. Increase in this indicator – sign of strengthening of dependence of the enterprise on creditors and a certain decrease in his financial firmness.

It is considered that the similar tendency demonstrates increase in financial risk, that is about a possibility of loss of solvency.

The more than a coefficient exceeds 1; the dependence of the enterprise on borrowings is more.

• 3)    The coefficient of mobility of current assets is defined as the relation of money to the cost of current assets:

К 2015 = 11806: 28621=0,41;

К 2016 = 18490: 31836=0,58.

• 4)    The mobility ratio is defined as the relation of own current (short-term) assets to equity:

К 2015 =-355: 28266 =-0,012

К 2016 = 4146: 35982 = 0,115.

• 5)    The coefficient of mobility of all enterprise assets is defined as the relation of cost of current assets to the cost of all assets:

К 2015 = 11806:50542=0,23;

К 2016 = 18490: 65114=0,28.

• 6)    The coefficient of mobility of current assets relation of money and shortterm financial investments to the cost of current assets:

К 2015 = 83:11806=0,007;

К 2016 = 133: 18490=0,007.

• 7)    The coefficient of security of stocks with own sources of their forming is defined as a difference of own short-term means and long-term borrowings between non-current assets in relation to stocks:

К 2015 = 493-28621: 9975 =-2,79;

К 2016 =-1991-31836: 14490 =-2,06.

• 8)    The coefficient of property of production appointment is defined as the amount the main of means, the incomplete capital investments, the long-term financial investments and stocks to asset cost

  К 2015 = 75301+1488+14+9975:50542=1,72;

К 2016 = 86925+869+20+14490: 5114=1,75.

Estimating the received results it is possible to tell that a financial condition of the enterprise extremely heavy.

Values of the majority of the calculated coefficients already stepped over the critical mark and continue to decrease.

It is possible to draw a conclusion that at the enterprise there is a crisis situation. The value of coefficient of security with own current assets in 2015 and 2016 in general has negative value. It says about absence at the enterprise of own means for forming of current assets, and considering growth in 2016 of the amount of current assets of 1,6 times it is possible to tell that the enterprise is constantly faced by a problem of search of funds for financing turnover the capital [5].

The efficiency of use of fixed assets is characterized by capital productivity indicators (the sales amount relation to the annual average cost of fixed assets), capital intensities (the return indicator to capital productivity, a capital adequacy (the cost of fixed assets falling on one worker).

Quantity characteristics of reproduction of fixed assets are calculated by the following basic formula (3):

ОФн + ОФв - ОФл = ОФк,               (3)

where ОФн, ОФк - the cost of fixed assets for the beginning and the end of the year;

ОФв - the cost of the entered fixed assets;

ОФл - the cost of the written-off fixed assets.

The movement of fixed assets can be characterized by means of the following coefficients: updating coefficient, leaving coefficient.

The coefficient of updating shows the specific weight of the fixed assets entered in the accounting period.

The coefficient of leaving shows the specific weight of the left fixed assets. This group of indicators characterizes only the movement of fixed assets and tells nothing about their use.

The efficiency of use of fixed assets decides on the help of system of the indicators subdivided on generalizing and private.

The first characterize efficiency of use of all set of fixed assets. The second -separate elements of fixed assets [4].

Relative economy of property, plant and equipment (formula (4)):

Э ОС = ОС 1 – ОС 0 х Iвп,              (4)

where, ОС 1, ОС 0 ,- respectively annual average fixed asset cost in basic and reporting years;

Ivp - products production index.

In conclusion of the analysis count reserves of increase in production and capital productivity. Commissioning of the new equipment, reduction whole-day and the vnturismennykh of idle times, increase in coefficient of working in shifts of operation of the equipment, his more intensive use [5] can be them.

Further, to study dynamics of fixed assets, we will allocate an active part of business fixed assets.

We will make table 5, analyzing the received results, it is possible to note that the fixed asset cost of «Ekslyuziv Mebel» increased by 13667714 thousand tenges, including the fixed business assets – for 12304362 thousand tenges, their active part – for 4054956 thousand tenges.

The table 5-Availability, the movement and dynamics of property, plant and equipment of «Ekslyuziv Mebel» in 2015 - 2016.

Property, plant and equipment	Availability for the beginning of year, one thousand tenges.	Receipt in a year, one thousand tenges.		Left in a year, one thousand tenges		Availabili ty on the end of the year, one thousand tenges.	Exceedi ng of receipt over leaving, one thousan d tenges.	Grow th rate, %
		In total	including it is entered new fixed assets	In total	includin g liquidate d
Fixed business assets including:	58900969	21321675	2432501	9017313	460946	71205331	12304362	120,1
1. Active part of the main business assets	33449123	10728197	88429	6673241	460946	37504079	4054956	112,1
2. the main business assets of other industries	58097	18733	—	—	—	77830	18733	133,9
3. the fixed nonproductive assets	3695034	1498748	—	154129	—	5039653	1344619	136,4
In total	62654100	22839156	2432501	15690427	460946	76322814	13667714	121,8

Note – the table is made on the basis of a source [7]

Business fixed assets of other industries increased in the amount by 18733 thousand tenges, and non-productive fixed assets – for 1344619 thousand tenges, that is significant increase in cost is observed both on fixed assets in general, and on their separate divisions, but at very low introduction of funds to action. This difference is formed at the expense of the revaluation which is carried out in 2015, very considerable on the amount.

Therefore, at the following stage it is reasonable to consider the amount of revaluation and to study availability and dynamics of property, plant and equipment without her influence.

When carrying out the analysis coefficients of updating, leaving and gain of fixed assets should be considered it is interconnected [6].

We will consider a situation with fixed asset movement without revaluation influence for what we make table 6.

The table 6-Availability, the movement and dynamics of property, plant and equipment of «Ekslyuziv Mebel» in 2015 (without revaluation influence)

"д св £ а Ё О £	о . д о “ д о    § 2 О Ё	Receipt in a year, one thousand mln,tenges.			Left in a year, one thousand mln.tenges.		Availability on the end of the year, one thousand mln.tenges.		д ^ о о Д зд тз rt д О  *-•  ей О У й о > Д ХОД И £	0х аГ о и
		75 о д	•^  >  (Л "в й "О 3 0 0 75 S3 Д О *ч • гч	д О "ей 75 Й	75 о д • ^	ею д чз 2 £ £ ей д 2 ст 2	д ей О	о р
Main business assets, including:	58900,9	21321,6	2432,5	18595,4	9017,3	460,9	71205,3	52609,9	6584,81	89,32
1. Main business assets of other industries	58,097	18,73	-	18,73	-	-	77,8	58,09	-	100
2. Fixed nonproductive assets	3695,03	1498,7	-	1010,3	154,1	-	5039,6	4029,2	-154,12	109
in total	62654,1	22839,1	2432,5	1790,2	9017,1	460,9	76322,8	56697,2	-6584,6	90,49

Note – the table is made on the basis of a source [7]

Attracting additional data, it is reasonable to find out whether updating of fixed assets due to new construction or modernization, replacement of the old equipment on new is performed, more highly productive, and to draw the corresponding conclusion on efficiency of application of fixed assets in «Ekslyuziv Mebel» data on extent of updating, leaving and a gain of fixed assets are created in table 7.

Table 7-Analysis of Extent of Updating, leavings and gain of property, plant and equipment of TOO "Ekslyuziv Mebel"

Coefficients	Calculation	Level of coefficients
1. Updates of all property, plant and equipment:
- on all arrived (Ко)	2726252 : 56697280	0,048
- on put into operation (Кв)	2432501 : 56697280	0,0429
2. Updates of the fixed business assets:
- on all arrived (К о )	2726252 : 56697280	0,048
- on put into operation (Кв)	2432501: 56697280	0,0429
3. Updates of an active part of the fixed business assets
- on all arrived (К о )	10728197 : 37504079	0,286
- on put into operation (К в )	884291 : 37504079	0,0236
4. Leavings of all property, plant and equipment:
- on all left (Квыб)	9017186 : 62654100	0,144
- on liquidated (К ликв )	460946 : 62654100	0,0074
5. Leavings of the fixed business assets:
- on all left (К выб )	9017313 : 58900969	0,153
- on liquidated (Кликв)	460946 : 58900969	0,0078
6. Leavings of an active part of the fixed business assets:
- on all left (К выб )	9017313 : 58900969	0,153
- on liquidated(Кликв)	460946 : 58900969	0,0078
7. Gain (К пр )
- on all property, plant and equipment	-6584685 : 62654100	-0,105
- on the fixed business assets	-6584812 : 58900969	-0,112
- by an active part of the fixed business assets	-6584812 : 33449123	-0,197
Note – the table is made on the basis of a source[7]

Follows from data of table 7 that the coefficient of updating of all property, plant and equipment on all arrived, is equal 0,048 at the level of the same indicator by an active part of the industrial and main business assets 0,286, i.e. updating of fixed assets happens more due to updating of an active part.

Thus, extent of updating of all fixed assets, on arrived, makes 4,8%, and extent of updating on put into operation – 4,2%.

By consideration of coefficients of leaving it is possible to draw a conclusion that leaving happens at the expense of an active part of fixed assets (coefficients are equal respectively to 0,144 and 0,153).

All coefficients of a gain have negative value that speaks about exceeding of fixed asset retirement over receipt and is, undoubtedly, the negative moment.

Thus it is possible to note that the fixed asset cost of «Ekslyuziv Mebel» in reporting year increased by 13667714 thousand tenges, including the fixed business assets – for 12304362 thousand tenges, their active part – for 4054956 thousand tenges.

The fixed business assets of other industries increased in the amount by 18733 thousand tenges, and non-productive fixed assets – for 1344619 thousand tenges, that is significant increase in cost is observed both on fixed assets in general, and on their separate divisions, but at very low introduction of funds to action.

Without revaluation influence, the amount of property, plant and equipment of the enterprise decreased on 9,51 in view of exceeding of leaving over revenues to 6584685 thousand tenges. The cost of the fixed business assets fell on 10,68, fixed business assets of other industries – was left without changes with simultaneous value addition of nonbasic business assets on 9,04, as caused reduction in cost of all fixed assets.

Are a consequence of it also extremely low value of all coefficients of updating: extent of updating of all fixed assets, on arrived, makes 4,3%, and extent of updating on put into operation – 4,2%.

The basic the directions of improvement of use of property, plant and equipment in «Ekslyuziv Mebel» is reconstruction and modernization that will allow to increase technological level of production and to reduce labor input of products. Additional capital costs at the same time will make 2303,22 thousand tenges, the economic effect gained within the first year from implementation all listed in actions will be 2434,75 thousand tenges. The payback period of the made capital investments will make 2303,22/2434,75 = 0,9 years [7].