PROBLEMS WITH ACCOUNTING AND FINANCIAL REPORTING OF ACQUIRED LICENSES TO OPERATE

According to the law, business entities are required to possess a license in order to carry out their activities. The license grants the right to conduct relevant business activities. The author assesses the regulatory framework that governs the licensing procedure and its reflection in the accounting and financial statements of an enterprise. The article explores the process of determining the initial cost of a license to operate as an intangible asset, as well as the accounting procedures for licenses with limited and unlimited validity periods, including those that require one-time payments or payments in installments. Furthermore, the article delves into the unique aspects of calculating the depreciation of licenses for the right to operate. Penalties for conducting economic activities without obtaining the required license or for violating licensing conditions are determined by law. Proposed changes aim to accurately reflect the acquisition and write-off of licenses in accounting and financial statements. Specifically, it is recommended that this type of intangible asset be recorded at the cost of the annual fee and have a useful life of one year. This is because the annual fee only guarantees the right to operate for one year, and after the next payment, the cost of the license should be increased by this amount. This accounting method can help ensure that the financial statements accurately reflect the value of licenses, which can prevent overstatement of the company's assets and accurately reflect the value of receivables. The proposed procedure applies to licenses with unlimited validity or those paid in installments. This could potentially enhance the reliability of the financial analysis results regarding the company's condition.