Imputed interest
Imputed interest as part of the imputed costs in accounting is taken into account so that the capital employed by the entrepreneur in his company without interest receives a fictitious interest rate. He had namely its capital does not invest in the company, but on the capital market created , he would collect a return.
General
There are types of costs in the company that do not appear as expenses ( pagatorial costs ) in the profit and loss account , but still have to be taken into account when calculating the costs . These additional costs or other costs are in the company's internal pricing used so that the cost of the cost carrier strain with the effective values of consumption. These imputed costs include, in detail, depreciation , interest , rent , entrepreneur wages and risks .
Return on equity
The total capital of a company consists of equity and debt . This total capital is tied up in fixed and current assets , so that this capital use represents a consumption of goods. For the debt his company needs the creditors interest paid, while the entrepreneur's equity free of interest must provide. If the entrepreneur had not brought this equity into his company, but invested it on the capital market, he would receive interest on it. This lost interest is called opportunity costs , so that the imputed interest does not represent anything other than the opportunity costs of a fictitious financial investment.
Goal setting
The basic idea is to include interest on equity as a cost variable in cost accounting . This ensures that the operating result only shows the profit that has been generated with the company's own operating activities above the interest otherwise attainable on the capital market. At the same time, this fictitious interest rate is included as a type of cost in the calculation of the prime costs and the prices of the services and thus enables success-oriented price-cost control. Time, operating and performance comparisons are also more precise in terms of informative value thanks to the imputed interest rate, as the influence of variable external financing and thus the interest burden is eliminated.
detection
There are two reasons for determining the imputed interest:
- More precise presentation of the profitability : If only the interest expense for the borrowed capital is taken into account, a company with a high degree of indebtedness would be presented comparatively less favorably than a company with more equity, although both have the same amount of total capital. By determining the imputed interest, this distorted representation is no longer applicable.
- Smoothing out interest expenses : Greater short-term fluctuations in loan interest rates are leveled out if constant long-term interest rates are used as a basis for equity.
Imputed interest is a variable that is not exactly easy to calculate. Due to the decrease in the financing requirement due to the ongoing imputed depreciation , these costs are falling from year to year, but must be calculated back to the average over the total useful life for the price calculation. However, since the actual interest requirement in the first half of the useful life is higher than this average and, so to speak, fewer funds remain for the purposes of imputed depreciation, the average financing requirement is more than 50% of the original acquisition costs (comparable to the development of debt for an annuity loan ).
When determining the imputed interest, only those capital components are used that are tied up in the capital required for operations . The average capital tied up results from the formula
The amount of the imputed interest rate depends on the type of overall financing:
- in the case of predominantly external financing , the average interest rate on external capital is used;
- with predominantly equity financing , the usual market interest rate applies for loans to first-class borrowers, such as certain government bonds ;
- in the case of mixed financing, the weighted average interest rate according to the WACC approach .
The fictitious interest expense for equity becomes an imputed component of production costs in the company's internal cost accounting , but is not permitted in the commercial and tax balance sheet . According to Section 255, Paragraph 3, Clause 1 of the German Commercial Code , interest on borrowed capital may usually not be capitalized . Since there is already a prohibition on capitalization for actually incurred borrowing interest, the fictitious interest expense for equity capital is certainly not allowed to be capitalized. Therefore, the imputed equity interest is one of the additional costs.
Business aspects
Imputed costs are offset in the cost accounting and are also included in the operating result , but have no effect in the external annual financial statements under commercial law and are therefore not recognizable there. The internal price calculation is not based on the commercial result of the financial accounting , but on the result of the cost accounting, where the imputed costs are recorded. The lower price limit would be calculated too low if the imputed rents and leases were not included. The internal price calculation provides the price that a company would ideally have to charge on the market for its products or services . If this price cannot be achieved for reasons of competition, the competitive price must be selected. Imputed costs should generate a fair, comparable cost structure within the framework of a profit center calculation .
See also
Individual evidence
- ↑ Clemens Kaesler, cost and performance accounting of accountants , 2011, p. 30 ff.
- ↑ Rainer Bramsemann, systems of cost accounting , 1995, p 47
- ↑ Harry Zingel, textbook on cost and performance accounting , 2004, p. 18 ff.
- ↑ Peter Bachmann, Controlling for Public Administration , 2009, p. 79
- ↑ Günter Wöhe , Introduction to General Business Administration , 25th edition 2013, p. 897 f.
- ↑ Wolfgang Eisele, Technique of operational accounting , 2005, p. 665