Agricultural entities may benefit from certain forms of financial support, regulated by various regulations. To the extent that the funds thus allocated represent subsidies from an accounting point of view, their accounting treatment is the same for all categories of economic operators.
By the Government Emergency Ordinance no. 11/2021, published in the Official Gazette no. 191 of February 25, 2021, the payment schemes were approved as mechanisms to support and guarantee the protection of the beneficiaries’ rights, respectively the direct payment schemes and the aids transitional national laws, which apply to agriculture in 2021 and 2022.
Direct payment schemes:
According to the same normative act, the direct payment schemes are the following:
- single payment scheme on the surface;
- redistributive payment;
- payment for agricultural practices beneficial for the climate and the environment;
- payment for young farmers;
- coupled support scheme;
- simplified scheme for small farmers.
By definition, the farmer is a natural or legal person or an associative form of natural or legal persons, regardless of its legal status, whose holding is located on the territory of Romania and which carries out an agricultural activity.
For the purposes of the above provisions, the expression agricultural activity means:
- a) the production, rearing or cultivation of agricultural products, including the harvesting, milking, breeding of animals and their keeping for agricultural purposes;
- b) maintaining an agricultural area in a state that makes it suitable for grazing or cultivation, without any preparatory action that goes beyond the framework of the usual agricultural methods and equipment, by performing at least one activity provided by the normative act.
The categories of beneficiaries, the conditions that farmers must meet in order to benefit from direct payments are provided by the same normative act – both in the form of generally applicable conditions, and individualized by categories of direct payment schemes.
EMERGENCY ORDINANCE no. 11/2021 mentions the conditions that farmers must meet in order to be considered active farmers.
Transitional national aid (ANT):
Regarding the transitional national aids, named in the EMERGENCY ORDINANCE no. 11/2021 ANT, they are granted in the vegetal and zootechnical sectors.
The source of financing for the ANT payment is provided from the state budget, through the budget of the Ministry of Agriculture and Rural Development, within the limits of the budgetary provisions approved annually.
The transitional national aids represent payments granted to farmers in the sectors that benefited from complementary direct national payments in 2013.
The amounts intended to pre-finance the expenditure related to the direct payment schemes, the market measures and intervention in agriculture, as well as the specific aids, which are financed from the European Agricultural Guarantee Fund (FEGA), are provided in the budget of the Ministry of Agriculture and Rural Development. distinct position.
The eligibility criteria, the specific conditions and the manner of implementation of the payment schemes provided for in Article 1 (2) and (3) of the EMERGENCY ORDINANCE 11/2021 and of the rural development compensatory measures provided for in Article 35 (3) shall be approved. by MADR Order.
Therefore, the MADR Order no. 45/2021 was published for the approval of the eligibility criteria, the specific conditions and the manner of implementation of the payment schemes provided in Article 1 (2) and (3) and Article 35 (3) of the Ordinance. Government Emergency Ordinance no. 11/2021 for the approval of payment schemes and guarantee instruments that apply in agriculture in 2021 and 2022, with subsequent amendments.
The general conditions that an applicant must meet in order to benefit from the granting of payments within the direct payment schemes are those provided in article 9 of the ordinance.
Verifiable evidence regarding the fulfillment of some of the conditions provided by the EMERGENCY ORDINANCE no. 11/2021 for legal entities economic operators are the annual financial statements, respectively the annual accounting reports, accompanied by the form “Informative data”, prepared according to the provisions of the Accounting Law no. 82/1991, republished, with the subsequent modifications and completions.
We mention that the farmer is obliged to register in his own accounting, according to the legal provisions in force, the data from the internal accounting documents that he submits to APIA.
Other provisions contained in OMADR no. 45/2021 refers to situations in which farmers are not eligible for payment or no payments are granted for certain areas of land.
Relevant accounting aspects:
According to the accounting regulations approved by OMFP no. 1.802 / 2014, with subsequent amendments and completions, the elements presented in the individual annual financial statements and the consolidated annual financial statements are recognized and evaluated in accordance with the general principles provided by the accounting regulations.
According to the accrual accounting principle, the effects of transactions and other events are recognized when transactions and events occur (and not as cash or cash equivalents are received or paid) and are recorded in the accounts and reported in the financial statements for the periods.
As a result, from an accounting point of view, the accrual accounting principle applies to the recording in accounting of all economic and financial operations, including in the case of income from subsidies, which are recognized at the same time as the corresponding expenses, and not to the receipt of the subsidy.
The basic rule used in the elaboration of the accounting procedures is to correlate the expenses financed from the subsidies with the revenues from the subsidies, respecting the principle of accrual accounting.
Thus, the category of subsidies includes subsidies related to assets and subsidies related to income.
These can be received from: the government itself, government agencies and other similar national and international institutions. Government grants are sometimes referred to in other ways, such as: subsidies, allowances, premiums or transfers.
Government grants represent assistance provided by the government in the form of transfers of resources to an entity in exchange for compliance, in the past or in the future, with certain conditions relating to the operating activity of the entity.
The mere receipt of a grant does not itself provide conclusive evidence that all the conditions attached to the award of the grant have been or will be met.
The recognition of the incomes from the subsidies is carried out with the observance of the clauses that were the basis for their granting.
The fulfillment of the eligibility conditions of the subsidies influences the moment of the recognition in the accounting of the incomes from the subsidies.
In order to ensure the correlation of the expenses financed from the subsidies with the afferent incomes, this is done:
- from the point of view of the profit and loss account:
– during each month the expenses are highlighted according to their nature;
– at the end of the month, the subsidies corresponding to the expenses made are highlighted in the incomes;
- from the point of view of the balance sheet:
– the receivable from subsidies is recognized in correspondence with the revenues from subsidies, if the expenses incurred from these subsidies have been made, or on account of the deferred revenues, if these expenses have not been made yet;
– periodically, together with the request for reimbursement of the equivalent value of the expenses incurred or on the basis of other documents by which the due amounts are established and approved, the amounts registered as receivables from subsidies are regularized.
Grants are recognized, on a systematic basis, as income for periods corresponding to the related expenses that these grants are to offset.
In the situation where in a period the subsidies related to some expenses that have not been made are collected, the received subsidies do not represent incomes of that current period.
Therefore, the subsidies related to the incomes, related to the future periods, are registered in the accounting on account of the deferred incomes (account 472 “Revenues registered in advance”).
Reimbursement of a subsidy related to income is made by reducing deferred income, if any, or, in their absence, at the expense of expenses.
The entity presents in the explanatory notes information regarding the received subsidies, their destination and the elements that justify the fulfillment of the necessary conditions for granting the subsidies.
An entity also discloses in the explanatory notes information on the conditions that have not been met in connection with government subsidies and the obligations arising from their non-fulfillment.
Accounting treatment of income subsidies:
Grants awarded to cover expenses incurred:
– recognition of the right to receive the subsidy, corresponding to the amount corresponding to the part of the grant granted for the expenses that have been incurred:
445 “Grants ” = 741 „Revenue from operating subsidies ”
– collection of the subsidy:
5121 „Bank accounts in lei ” = 445 „Grants ”
Grants granted to cover future expenses:
– recognition of the right to receive the subsidy:
445 „Grants ” = 472 „Revenues registered in advance ”
– collection of the subsidy:
5121 „Bank accounts in lei ” = 445 Grants
– resumption of income of the amounts representing subsidies, as the expenses that are financed from them are registered:
6xx Expense accounts =%
3xx Inventory and production accounts in progress
4xx Third party accounts
si, concomitent, inregistrarea subventiei la venituri, pe masura efectuarii cheltuielilor:
472 „Revenues registered in advance ” = 741 „Revenue from operating subsidies ”
Legal basis:
- MFP Order 1802/2014 for the approval of the Accounting Regulations regarding the individual annual financial statements and the consolidated annual financial statements, with subsequent amendments and completions;
- MADR Order 45/2021 for the approval of the eligibility criteria, the specific conditions and the manner of implementation of the payment schemes provided in article 1 paragraph (2) and (3) and article 35 paragraph (3) of the Government Emergency Ordinance no. 11/2021 for the approval of payment schemes and guarantee instruments that are applied in agriculture in the years 2021 and 2022;
- EMERGENCY ORDINANCE 11/2021 for the approval of payment schemes and guarantee instruments that are applied in agriculture in the years 2021 and 2022.