When a municipality decides to liquidate an educational institution, the accounting department finds itself engaged in a rather complex process, ranging from inventory to the transfer of property to other institutions. More than just technical steps, this is a responsibility for accurate accounting, transparent decisions and error-free closure of the institution’s activities.
General information about the specifics of accounting for charitable aid can be found here.
Learn more about the pressing issue of accounting for grant funds in foreign currency here.
Recording charitable aid received in kind, which is intended for further transfer, is explained here.
In accordance with Article 104 of the Civil Code of Ukraine (hereinafter the CCU), a legal entity is terminated following reorganisation (merger, consolidation, division, transformation) or liquidation. The liquidation procedure for an educational institution begins with a decision by the founder (owner of the property).
Article 105 of the CCU sets forth the procedure for implementing a decision on the termination of a legal entity:
- Participants in a legal entity, the court or body that made the decision to terminate the legal entity must notify the body responsible for state registration in writing within three working days of the date of the decision.
- Participants of a legal entity, the court or the body that made the decision to terminate the legal entity must, as per this Code, appoint a commission for the termination of a legal entity (reorganisation or liquidation commission), the chair of the commission or the liquidator and establish the procedure and deadline for creditors to declare their claims to the legal entity that is being terminated.
The decision to transfer property is approved by an order (administrative document), which must contain a reference to the owner’s decision.
By decision of the founder, a liquidation commission is established, acting on the basis of Article 105 of the Civil Code of Ukraine. The commission undertakes any actions related to the termination of the institution’s activities according to the following procedure:
- Conducting an inventory of property, liabilities and settlements (as per the Regulation on the Inventory of Assets and Liabilities, approved by Order of the Ministry of Finance of Ukraine No. 879 dated 2 September 2014);
- Accrual of depreciation in the month of disposal of property;
- Transfer of property to other institutions based on the founder’s decision;
- Drawing up the standard form of the Fixed Assets Acceptance Certificate approved by Order of the Ministry of Finance of Ukraine No. 818 dated 13 September 2016 “On Approval of Standard Forms for Accounting and Write-Off of Fixed Assets by Public Sector Entities and Their Preparation Procedure” (hereinafter Order of the Ministry of Finance No. 818 dated 13 September 2016). Together with the original documents or copies thereof confirming the initial value of the transferred property, the amount of accrued depreciation, residual value and useful life;
- Drawing up the liquidation balance sheet, which reflects the results of decisions made regarding the collection of receivables; distribution of assets and capital; and repayment (write-off) of liabilities that led to the absence of assets, capital and liabilities of the liquidated institution as of the date of drawing up the balance sheet:
Once approved by the participants of the legal entity, the court or the body that made the decision on its liquidation, the liquidation balance sheet is submitted to the State Tax Service (hereinafter referred to as the STS) at the taxpayer’s primary place of registration. Furthermore, a notice regarding the commencement of the institution’s liquidation must be sent to the State Treasury Service, the statistical authorities and the Pension Fund of Ukraine.
In accounting, during the liquidation of an educational institution, property is transferred under the gratuitous transfer rules (Clause 8, Section II of the NP(S)BODS 121 (Fixed Assets)). The initial cost of fixed assets received free of charge from public sector entities (educational institutions as lower-level administrators of budget funds) is equal to the initial (revalued) cost of fixed assets of the public sector entity that transferred them, factoring in the costs directly related to bringing the fixed assets to a condition suitable for their use as intended.
Property can be transferred out both between institutions subordinate to the same managing authority and between institutions belonging to different authorities. Accordingly, these transactions are reflected in the accounting system in different ways, with the following accounting entries being made:
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No.
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Description of the transaction |
Correspondence of accounts |
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|
Debit |
Credit |
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|
Transfer of property between institutions subordinate to the same managing authority |
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|
1 |
Reflecting the value of fixed assets transferred free of charge within the body authorised to manage state (municipal) property |
5111 “Capital contributed to administrators of budget funds” |
10 “Fixed assets” |
|
2 |
Amount of accrued depreciation in the month of transfer |
1411 “Depreciation of fixed assets” |
8014, 8114 “Depreciation” |
|
3 |
Amount of accrued depreciation in previous months of the current year |
1411 “Depreciation of fixed assets” |
5511 “Fiscal results of the budget execution for the reporting period” |
|
4 |
Amount of accrued depreciation in previous annual periods |
1411 “Depreciation of fixed assets” |
5512 “Accumulated financial results of the budget execution” |
|
Transfer of property between institutions subordinate to different managing authorities |
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5 |
Reflection of the value of fixed assets transferred free of charge between institutions subordinate to different managing authorities: |
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|
|
|
for the amount of accrued depreciation, including in the month of disposal |
1411 “Depreciation of fixed assets” |
10 “Fixed assets” |
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|
for the amount of net book value |
8411 “Other expenses from exchange transactions” |
10 “Fixed assets” |
|
6 |
The amount of contributed capital is attributed to accumulated financial results. |
5111 “Capital contributed to administrators of budget funds” |
5512 “Accumulated financial results of the budget execution” |
Thus, an educational institution is liquidated in compliance with the Civil Code of Ukraine and accounting standards, and key actions (from inventory to preparation of the liquidation balance sheet) are performed by a liquidation commission established by a decision of the founder. During liquidation, property is transferred according to the rules for gratuitous transfer subject to drawing up the necessary primary documents, and the procedure for recording business transactions in the accounting system depends on whether the institutions are subordinate to the same or different managing authorities.
