Page 121 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE

classification. The difference between these two is that in the state

budget planned investments consider the acquisition of necessary funds
as well, however the national accounts system does not considers such

investments, in other words only new investments are considered.
According to the state budgetary classification of Azerbaijan

Republic the category of “capital expenditure” includes expenses

incurred by the organization for repair and maintenance. This category
includes also repair for following areas: living and military, social and

cultural, administrative, authority and other civil buildings. The category
of “Capital expenditures” consists of following articles: “Repair of

apartment funds”, “Capital repair of production objects”, “Repair of

social-cultural objects and welfare objects”, “Repair of authority and
administrative objects”, “Repair of roads” and “Other capital repairs”

[Law on Unique budgetary classification of Azerbaijan Republic, 2004].
In this situation it is quite hard to separate actual investment related

expenditures with ordinary maintenance expenses which are not
investment by the definition. In organizations expenses directed to

maintenance of production units in working condition are classified as

operating. However expenses directed to improvement of assets features,
prolongation of their useful lives and increase of their capacities are

considered as investment expenditures [System of National Accounts,
2009: 8-9]. In practice it is quite difficult to separate operating and

capital expenditures and on most of cases they are classified as capital
ones. According to Tax Code of Azerbaijan Republic depreciation

charges in amount of 2% of year-end net book value of machinery,

vehicles, buildings and constructions, 5% of year-end net book value of
techniques and transportation means, 3% of year-end net book value of

121