According to the Ministry of Public Finance Order(OMPF) no. 1802/2014 for the approval of the Accounting Regulations regarding the individual annual financial statements and the consolidated annual financial statements, point 265, other fixed receivables include guarantees, deposits and guarantees submitted by the entity to third parties.
The amount of the guarantee can be a fixed amount or a percentage of the contract value. Therefore, from the provider’s point of view, the guarantee granted represents a receivable, highlighted in the balance sheet as financial fixed assets or as a receivable.
Also from the point of view of the provider, the obligation assumed by him through the concluded contract, regarding the remedy of possible deficiencies generates a current legal obligation, with an uncertain value and date of appearance.
Guarantees with a maturity of more than one year are presented as financial assets in the annual financial statements.
Guarantees with a maturity of less than one year are considered receivables for presentation in the annual financial statements.
According to point 377 of the accounting regulations, provisions are established for items such as expenses related to the service activity during the warranty period and other expenses related to the guarantee granted to customers.
According to the requirements of point 369-377 of the mentioned accounting regulations, the providing company has the obligation to establish a provision for the service activity during the warranty period and other expenses regarding the guarantee granted to the clients.
We specify that the value of a provision represents the best estimate of the probable expenses or, in case of an obligation, of the amount necessary for its extinction. Provisions may not exceed in value the amounts that are necessary to settle the current obligation at the balance sheet date.
The registration at income of the provisions constituted for the guarantees of good execution is made as the expenses are made with the remedies or at the expiration of the guarantee period registered in the contract.
Fiscal aspects related to VAT:
The registration of the guarantees in the issued invoices is not obligatory, but insofar as they are registered in the invoices together with the performed works or in distinct invoices, the invoice will not include a distinct VAT related to the guarantee.
VAT will be collected at the total value of the executed works and services, without this amount being influenced by the guarantee of good execution.
Accounting monograph (registration of performance guarantees):
- Registration of the initial invoice
411 „Clients” = %
704 “Revenue from services rendered”
4427 „VAT collected ”
- registration of the performance guarantee as a percentage or fixed amount
2678 „Other fixed assets ” = 411 „Clients”
- collection of the invoice difference minus the retained guarantee
5121 „Bank accounts in lei ” = 411 „Clients”
- registration of a provision for guarantees granted
6812 = 1512
„Operating expenses „Provisions for
on provisions” guarantees granted to Customers”
- performing repair works during the warranty period
6XX = 301,421
- partial resumption of revenues of the existing provision
1512 = 7812
……. Provisions for …………………….”Income from provisions”
..guarantees granted to Customers “
- collection of the guarantee at the end of the guarantee period
5121 = 2678
“Bank accounts in lei ” „Other fixed assets ”
Legal basis: OMFP Order no. 1802/2014 for the approval of the Accounting Regulations regarding the individual annual financial statements and the consolidated annual financial statements.