Remodel and Refresh Regulations for Restaurant and Retail Accounting

Q and AWe recently received a question from one of our clients:

“There are some new remodel and refresh regulations (Rev. Proc. 2015-56). Do you have any suggestions on how Bassets could handle the depreciation. Remodels and refreshes would be allowed to expense 75% of the Lease Hold Improvement in the first period and the remaining 25% would be allowed bonus depreciation. “

Here is our reply:

Yes, we added a new ITC code “C” for Capitalization Rules. Here is a sample LHI (Lease Hold Improvement) calculation example with the new code:  

  • Cost $1,000.00
  • 75% of $1,000.00 asset cost can be expensed at $750.00
  • 25% of $1,000.00 asset cost can be depreciated @ $250.00
    • Qualified LHI w/ 50% bonus depreciation @ $125.00
    • Qualified LHI w/ Straight Line, Full Month 1st Year Convention over 15 years

T1 Tax Report Columns:

  • Purchase Price = $1,000.00
  • Section 179 = $0.00
  • ITC Amount = $750.00
  • Bonus Depreciation = $125.00
  • Depreciable Basis = $125.00
  • Prior, Current Period, Total Accum and Net Book Value reflect current period depreciation during the life of the asset

The start or effective date for this new feature applies to assets acquired after 01/01/2015. For more information, see this post “Majority of Costs to Remodel or Refresh Retail Stores Are Deductible Under New Safe Harbor” from TheTaxAdvisor.com.

Questions? Comments? Let us know in the comments section below.

More information about Bassets eDepreciation software can be found at Bassets.net or depre123.com. At Bassets register for our live webinar, download a free evaluation copy and get a personalized pricing estimate. At depre123 try out our Free Depreciation Calculator and check out our cloud based fixed assets application.


Start Depreciation on a Fixed Asset After it is Placed in Service

We have an asset that we acquired and placed in service last year but it did not get entered into Bassets eDepreciation until several months later. How do we account for the depreciation we missed?

Yes, this is a tricky question and we have created a feature called Adjustment to Basis to handle this situation. If you enter the asset the purchase price on the original service date then depreciation will be calculated in the previous year and will change your prior accumulated number.

The solution is to enter the asset with zero cost to avoid any depreciation amounts. Then enter an adjustment to basis with a date when you want to actually start the calculation. Bassets eDepreciation will calculate the missed depreciation and then add that amount to the adjustment period.

Let’s look at an example. Below is an asset placed in service in October of 2015 without a purchase price. You can see that we then apply a $6,000 adjustment to basis with a March 2016 adjustment date:

Start Depre After Placed in Service 1

The $6,000 amount is easy to illustrate the effect since this results in $100 (6,000 / 60) depreciation amount per period. A 5 year life with 12 periods per year is shown below:

Start Depre After Placed in Service 2

Since this asset was place in service in October of the previous year, we missed 3 (Oct, Nov, Dec) periods of depreciation. Additionally we missed 2 periods (Jan, Feb) in the current year. So a March adjustment accounts for the 5 missing periods by adding $500 to the normal $100 to result in $600 of depreciation in the adjustment period. You can see that the remaining life is then calculated at the normal $100 per period.

Adjustment to Basis is a very powerful feature that allows you to adjust depreciation basis without impacting monthly depreciation that has already booked to your general ledger. This is just one example but there are many other situations where this feature can account for changes in cost.

Questions? Comments? Let us know in the comments section below.

More information about Bassets eDepreciation software can be found at Bassets.net or depre123.com. At Bassets register for our live webinar, download a free evaluation copy and get a personalized pricing estimate. At depre123 try out our Free Depreciation Calculator and check out our cloud based fixed assets application.

Capital Cost Allowance (CCA) for Canadian Assets

Q and AIn Canada you can claim depreciation with Capital Cost Allowance (CCA). Can you explain the CCA Classes and show a sample calculation?

Yes, Canadian depreciation utilizes asset classes based on the type of asset to determine the appropriate depreciation percentage. Here is a basic chart of the rates:

Capital-Cost-Allowance-w2

There is a complete list of Canadian Asset Classes at the Canada Revenue Agency with much more detail. Each class depreciates at a different percentage based on the type of asset such as building, furniture or other type equipment. Once you determine the correct class then use the corresponding rate in your depreciation calculation. 

For example, if you purchased a laptop computer for $1,000 this would fall into class 10 and have a 30% rate. In the first year you multiply $1,000 times .30 to get $300 and then apply a half year convention to get $150. This leaves an $850 balance which gets multiplied by .30 to get $255 in the second year. In the third year the balance would be $595 ($850 – $255) and would be multiplied by .30 to result in $178.50. The calculations continue this way using the remaining balance multiplied by the rate.

For more information on Canadian Capital Cost Allowance and calculating depreciation see some of our other posts: 

Questions? Comments? Let us know in the comments section below.

More information about Bassets eDepreciation software can be found at Bassets.net or depre123.com. At Bassets register for our live webinar, download a free evaluation copy and get a personalized pricing estimate. At depre123 try out our Free Depreciation Calculator and check out our cloud based fixed assets application.

Best Practices for an Effective Backup Plan

Best Practices for BackupAre you prepared for a disaster? Many of our clients track thousands of fixed assets and all of the associated information. What would happen if your server went down? It is important to verify with your IT department that your fixed asset database is being properly backed up.

Regular backups are vital to ensure all of your monthly updates are preserved. Below we offer a basic strategy and best practices for backup.

Rotation Scheme – since fixed asset data does not change every day of the month a daily backup is usually not necessary. At a minimum, we recommend a weekly/monthly/annual rotation:

  • Weekly – at the end of each work week
  • Monthly – after the month end close of the books
  • Annual – after the close of your fiscal year

Storage Location – most of the backups can reside at your location but it is also necessary to employ a secondary place to store periodic files.

  • On-premise – stored in your local data center.
  • Off site – periodic backups should be sent to a remote location for effective disaster recovery.

Additional Considerations – it is also critically important to establish exactly what is being backed up, who is in charge of the backup procedure and that the backup is successful.

  • Who – this is typically an IT function but it is up to the fixed asset system administrator to ensure that this process has been defined and is being executed on a regular schedule.
  • What – the fixed asset SQL Server database contains all of your company’s data and can be easily backed up through SQL Server Enterprise Manager or other utilities. Additionally you may want to consider making periodic copies of the application folder.
  • When – establish backup timing based on the rotation scheme above.
  • How – all of this is a waste of time of the backups are not successful. Make sure that you test your backups BEFORE you need them.

A good backup strategy is not difficult to establish and will give you piece of mind in the reliability of your software. Hopefully you will never need to actually utilize your backup files, but if one day it does become necessary then you will be very glad to have a reliable copy available.

Questions? Comments? Let us know in the comments section below.

More information about Bassets eDepreciation software can be found at Bassets.net. While there you can register for our live webinar, download a free evaluation copy and get a personalized pricing estimate.

Manage Notes in Fixed Asset Software

Manage NotesThe management of fixed assets is a complex task for many organizations. If you are responsible for just a hand full of assets then it is easy to keep track of the associated information. As the number of assets grows to hundreds or thousands of records then a software solution is needed to record all of the asset properties, calculate depreciation, and attach images (purchase orders, invoices, etc.) and record all accompanying notes.

The notes on an asset record can include system generated messages, maintenance changes, additional detail or any other random information. This can sometimes consist of just a few lines or, in other instances, could be a whole page or more of notes. Viewing the notes on any individual asset is easily accomplished, but what if you want to view the notes for a group of assets? We recently received this question from one of our clients and enhanced Bassets eDepreciation to meet the request.

We added the Notes field to the Column Selection Form to allow Notes to be exported to Excel. Now notes can be selected just like any other asset property and displayed in the browse. To view all of the notes for the selected group, first export to Excel and then do some Excel formatting to improve the presentation:

  • Open the export spreadsheet in Excel
  • Ctrl-A to select all data
  • Home Tab, use “Wrap Text” to format the cells to see line breaks
  • Home Tab, Cells Group, open Format Options
  • Click AutoFit Row Height to adjust each row to display notes

All the notes will now display for each asset record. This is a much more flexible option then just a generic notes report since you can also export any other fields along with the notes. Once in Excel you are free to format the information for optimal presentation.

What do you think? Let us know in the comments section below.

More information about Bassets eDepreciation software can be found at Bassets.net. While there you can set up a demonstration, download a free evaluation copy and get a personalized pricing estimate.