In the Official Gazette (Part I) no.18 of 06 January 2023 was published the MF Order no. 4291/2022 to regulate some accounting issues.
Amendments/complements to the Accounting Regulations on individual annual financial statements and consolidated annual financial statements, approved by OMFP 1802/2014:
- changes to the capitalisation of debt costs:
- An entity must stop capitalising borrowing costs during prolonged periods when it is not actually working on the long-lived asset.
- An entity may incur borrowing costs during an extended period when it discontinues activities necessary to prepare an asset for its intended use or sale. Capitalisation of borrowing costs is not interrupted during the period when the entity is performing significant technical and administrative work or when a temporary deferral is a necessary part of the process of preparing an asset for its intended use or sale.
- initial assessment of tangible assets:
Examples of costs that are incurred in connection with the construction of a tangible asset, directly attributable to it, are:
(…..) f)design costs and costs for obtaining permits, based on supporting documents attesting that they have been incurred in connection with the asset in question.
The original provision did not contain the condition that such expenditure be based on supporting documents.
- accounting for advances to suppliers:
If a customer pays an amount before the entity transfers a good or service to the customer, at the time of collection the entity records a liability to the customer. In this case, the liability to the customer is the entity’s obligation to transfer to the customer the goods or services for which it has received the amount.
Amounts received under the terms of the previous paragraph are recorded as a payable due to the customer (account 419 Customers – creditors). The entity derecognises that payable and recognises revenue when it transfers those goods or services and thereby fulfils its contractual obligation.
- accounting for expenses/revenues in advance:
An entity may sometimes charge a non-refundable upfront fee to the customer at or near the start of the contract (for example, activation fees in telecommunications contracts, set-up fees in some service contracts and upfront fees in some supply contracts). In this situation the entity shall determine whether the advance received relates to the rendering of a service in a future period.
If the advance received represents a prepayment made by a customer for services to be rendered in a future period, the corresponding amount is recognised in account 472 Deferred revenue and will be recognised as revenue when the services are rendered. If the advance does not relate to future services, the amount received from the customer is recognised as revenue in the period.
- distribution of dividends during the financial year:
Entities that receive dividends during the financial year recognise the corresponding amounts as liabilities (accounting item 461 Sundry/separate debtors = 467 Liabilities for interim dividend distributions).
The adjustment of the above amounts shall be made on account of dividends due on the basis of the legally approved annual financial statements of the entity which has opted to make interim dividend distributions (accounting items 461 Sundry debtors = 761 Income from financial fixed assets and 467 Liabilities relating to interim dividend distributions = 461 Sundry debtors/separate liability).
- amounts collected by an entity on behalf of third parties (new provision):
Examples of indicators that an entity is acting in its own name, without being limiting, are the following:
a) the entity is primarily responsible for contract performance, which includes responsibility for the acceptability of the specified good or service (for example, primary responsibility for the good or service meeting the customer’s specifications);
b) the entity has a risk related to inventory before or after the specified goods have been transferred to a customer (for example, if the customer has a right of return). Thus, if the entity obtains or undertakes to obtain the contractually specified good or service, this may indicate that the entity has the ability to direct the use of the good or service and obtain substantially all of the remaining benefits from it before the good or service is transferred to the customer;
c) the entity has the discretion to determine the price for the specified good or service. Pricing the customer for the specified good or service may indicate that the entity has the ability to direct the use of that good or service and obtain substantially all the benefits that remain from it. However, in some cases, an intermediary may have some pricing flexibility to generate additional revenue from the service or to arrange for goods or services to be provided to customers by other parties.
If another entity assumes the performance obligations and rights under the contract so that the entity is no longer obliged to deliver the contracted good or service to the customer (i.e. the entity is no longer acting on its own behalf), the entity should not recognise revenue. In this case, the entity shall consider whether another entity assumes the rights and obligations under the contract so that the entity is no longer obliged to deliver the contracted goods or services to the customer. In this case, the entity is no longer acting on its own behalf and, as a result, does not have to recognise revenue for those goods or services. Instead, it must determine whether it is acting as an intermediary and recognise revenue accordingly.
- royalty income:
According to the MF Order no.4291/2022, a new subsection “Assignment by licensing contract of intellectual property” is introduced.
A licence sets out the rights of a customer in respect of the intellectual property of an entity. Intellectual property licenses may include, but are not limited to, any of the following:
a) software and technology;
b) movies, music and other forms of media and entertainment;
c) franchises; and
d) patents, trademarks and copyrights.
In addition to the obligation to grant a customer a licence or licences, an entity may also undertake to transfer other goods or services to the customer. As with other types of contracts, when a contract with a customer includes an obligation to grant a licence or licences, in addition to other contracted goods or services, an entity shall identify each of the obligations under the contract.
When an obligation to grant a licence is not distinct from other contracted goods or services, an entity accounts for the grant of the licence and the other goods or services together as a single transaction.
Examples of licences that are not distinct from other contracted goods or services include the following:
a) a licence that is a component of a tangible asset and is essential to the functionality of the asset; and
b) a licence that the customer can benefit from only by using it in conjunction with a related service (such as an online service offered by the entity that allows the customer, by granting the licence, to access content).
Where a licence is not distinct, an entity shall determine whether the performance obligation that includes the licence is a performance obligation that is discharged at a point in time or over time.
If the obligation to grant the licence is distinct from other goods or services contracted for and, therefore, the obligation to grant the licence is a separate performance obligation, an entity shall determine whether the licence transfers to the customer either at a point in time or over time. To make this determination, an entity shall consider whether the nature of its licensing obligation to a customer is to provide the customer with either:
a) a right to access its intellectual property as it exists during the licence term; or
b) a right to use its intellectual property as it exists at a specific point in time when the licence is granted.
By granting the licence, the entity provides a right to access its intellectual property if all of the following criteria are met:
a) the contract requires or the customer reasonably expects the entity to engage in activities that significantly affect the intellectual property to which the customer has rights, as specified in paragraph 4486;
b) the licensed rights directly expose the customer to any positive or negative effects of the entity’s activities referred to in subparagraph a); and
c) the activities referred to in point (a) do not result in the transfer of a good or service to the customer (for example, activities consisting of performing various administrative tasks to establish a contract).
Introduction of new accounts in the general accounting plan:
- Enter the accounts:
467 “Interim dividend payables”
6053 ‘Expenditure on gas consumption
6058 “Expenditure on other utilities”
694 “Income tax expenses arising from settlements within the tax group in the field of income tax”
794 “Income tax receipts arising from settlements within the tax group in the field of income tax” and group 79 “Income tax receipts”.
- Group 60 of the Chart of Accounts will be called “Expenditure on stocks and other consumables” and account 605 “Expenditure on utilities”.
Account 605 Expenditure on utilities
This account is used to keep track of expenditure on energy, water, natural gas and other utilities.
The debit of the account 605 Expenditure on utilities is recorded:
the value of consumption of energy, water, natural gas and other utilities (401, 408, 471, 542);
cleared amounts charged to expenses (473).”
- Regarding the function of the accounts:
Class 7 Income accounts include the following groups: 70 Net turnover, 71 Income relating to the cost of production in progress, 72 Income from the production of fixed assets, 74 Income from operating subsidies, 75 Other operating income, 76 Financial income, 78 Income from provisions, depreciation, amortisation and adjustments for impairment or loss of value and 79 Income from income tax.”
Account 467 Liabilities related to interim dividend distributions:
The account 467 Liabilities related to interim dividend distributions keeps track of the dividends received following the distributions made, according to the law, during the financial year and to be settled after the communication of the dividends established on the basis of the annual financial statements.
Account 467 Liabilities relating to interim dividend distributions is a liability account.
Account 467 Liabilities relating to interim dividend distributions is credited with the amount of dividends received following interim dividend distributions (461).
The debit of account 467 Liabilities related to interim dividend distributions records the amount of dividends received as a result of interim dividend distributions and settled on account of dividends due on the basis of the annual financial statements (461).
The balance of the account represents the amounts received as dividends, following the interim dividend distributions made, according to the law, during the financial year.
Account 694 Income tax expense resulting from settlements within the tax group in the field of income tax
This account is used to keep track of income tax expenses resulting from settlements within the tax group in the field of income tax, defined according to the Tax Code.
The debit of the account 694 Expenses with income tax resulting from settlements within the tax group in the field of income tax is recorded:
the amount of income tax due as a result of settlements between members of the tax group in the field of income tax (451 and other accounts in which these liabilities are to be booked).
Account 794 Income tax receipts from settlements within the tax group in the field of income tax
This account is used to keep track of income tax revenues resulting from settlements within the tax group in the field of income tax, defined according to the Tax Code.
To the credit of account 794 Income tax revenue from settlements within the tax group in the field of corporate income tax is recorded: the amount of corporate income tax to be recovered following settlements between members of the tax group in the field of corporate income tax (451 and other accounts in which these receivables are to be booked).
Legal basis:
– MF Order no. 4291/2022 for the regulation of some accounting aspects;
– MFP Order no. 1802/2014 for the approval of the Accounting Regulations regarding individual annual financial statements and consolidated annual financial statements.