Põhivarasse

Põhivarasse is a term used in Estonian accounting to denote that an asset has been capitalized as a fixed asset on the balance sheet. The form -sse reflects direction into the fixed assets category, and the phrase is commonly used in phrases such as “põhivarasse kandmine” (capitalization into fixed assets).

Definition and scope: Põhivara refers to assets intended for long-term use in the production of goods or services, administration, or other operations, with a typical useful life extending beyond one year. Fixed assets are divided into tangible fixed assets (materiaalne põhivara) such as land, buildings, machinery, vehicles, and equipment, and intangible fixed assets (immateriaalne põhivara) such as software, patents, and licenses. Some assets may also be classified as investment property.

Recognition and accounting treatment: When an item is acquired, it may be recognized in the fixed asset register and recorded at cost as part of põhivarasse. Subsequently, fixed assets are depreciated (or amortized for intangible assets) over their useful life, reducing their book value. In many cases, impairment tests are performed if there are indications that value has fallen. The balance sheet presentation shows fixed assets net of accumulated depreciation and impairment.

Capital expenditures versus operating expenditures: Costs that extend the asset’s life, improve its capacity, or enable future benefits are typically capitalized into põhivarasse. Routine maintenance and ordinary repairs are usually expensed as incurred.

Lifecycle and management: The fixed asset lifecycle includes acquisition, capitalization into the fixed assets register, depreciation, potential impairment, and eventual disposal. Proper management ensures accurate reporting in financial statements and compliance with Estonian accounting standards and, where applicable, IFRS for consolidated reports.