Archive: Aug 2011

Tag, You’re It!: How to Track Your Fixed Assets

Although the type and quantity of a company’s fixed assets will vary from sector to sector and business to business, fixed assets – including land, office equipments, buildings, patents and machinery – are an essential part of any organization. Because of this, conducting and maintaining a comprehensive, accurate and up-to-date fixed asset inventory is an imperative part of the fixed asset accounting process. If your company’s inventory is misrepresented, the correctness of all further processes, controls and calculations is put in jeopardy – which could spell disaster for your bottom line. In short, having a precise picture of your company’s…

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Are Ghosts and Zombies Haunting Your Balance Sheet?

Following a spate of accounting scandals in the early 2000s – most notably Enron – the Sarbanes-Oxley Act was passed by Congress in 2002, resulting in the creation of the Public Company Accounting Oversight Board. This led to an increased auditor focus on internal controls, particularly the accuracy of companies’ financial statements and fixed asset management processes. So what does this mean for your company? Simply put, auditors may be looking to review your business’ property records to locate and inspect fixed assets, then determine the fair value. Rather than using book or tax depreciation, valuation specialists will use their…

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Recoverable Life of a Closed-Loop Cooling System’s Assets

Did the IRS’s recent private letter ruling on the recoverable life of assets used in a closed loop district cooling system pop up on your radar? No?  I would have missed it except an associate pointed me to it.  It is surprisingly interesting. The 12 page ruling determined that the assets do not have a specified class life in the IRS regulations and therefore they are considered 7-year property. This is more tax advantageous than the initially considered possibilities of 15, 20 or 25-year property. Background The Taxpayer requested the ruling with respect to their district cooling system, in which…

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Revenue Procedure 2011-26, Luxury Vehicles, and Bonus Depreciation

On December, 17, 2010, President Obama signed into law the “Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010”. In this legislation was a provision for 100% bonus depreciation. What this means is that any assets placed into service during the qualified period can be fully expensed. In previous years we were allowed to take 30% bonus depreciation, and then later 50% bonus depreciation, but with this new legislation, this was the first time we were allowed to take 100% bonus depreciation. What’s really nice about this provision is that it allows for the full expensing of assets…

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Back to the Basics: Depreciation

Depreciation can be defined as the decline in an asset’s economic and physical value. It is recorded to allocate an asset’s economic benefits over its useful life, and must be periodically reflected on your company’s books, as per the Generally Accepted Accounting Principles. Asset depreciation is calculated based on four factors: The asset’s cost The asset’s estimated life span The asset’s residual value, i.e. its book value after being fully depreciated The method of depreciation The cost of an asset is not just its invoice price. Any cost incurred to acquire, transport and prepare the asset for its intended use…

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