Depreciation and amortization in the extractive industries: domestic and international aspects

Abstract

Introduction. The development and application of advanced methods of calculation and accounting depreciation in the business are considered to be the urgent problem. Their successful resolution  contribute to unification and facilitation of the resolution of many issues of depreciation policies, facilitation of the use of the mechanism and further strengthening of the accounting of Ukraine regarding depreciation. One of the approaches for solving this problem is in-depth analysis and comparison of the method selection for particular enterprise, including enterprises of mining industry. Choosing the method of depreciation, companies have to look first at the advantages and disadvantages of each method set out in specific production conditions. Comparative analysis of the used amortization methods will also determine their effect on the structure of operation of expenses.

Purpose. The aim of the paper is to study the characteristics of accrual accounting and depreciation on mining sector enterprises, the establishment of advanced methods and of their application under certain operating conditions.

Results. Accumulated depreciation, which is included in the cost and is a component of production costs directly affect the economic performance of the company. Therefore the question of the correctness of calculation and recording requires special attention in the mining industry, since this type of expenditure occupies a key position in extraction of natural resources, and the structure of assets which are depreciated significantly different from other industries. Taking into consideration that in the mining industry amortization of wells is the biggest problem of amortization, it is important to choose a depreciation method that would, on the one hand, more fully consider the terms of useful usage of objects, and the other - with the greatest objectivity would allow to carry their value on products entering the amortization of costs. Among the recommended methods the method of cancellation of units of production is most suitable. It is based on the forecast calculation of depreciation.