Topic Thread

1.  Depreciable Assets

Posted 6 days ago
in my former life, I was an accountant at a natural gas company. Because we were so heavily regulated there were publications of what can be capitalized and what should be expensed. I relied on this list quite heavily.
Now I work at an excavation company and I'm having the hardest time finding a listing similar to what I had at the natural gas company. I was hoping to put together a list which could be distributed to our shop mechanics. Does anyone have a list that could help me out with this task or suggest a website that I should look at?
Thanks for your assistance.

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Roxine Davis
Accounting Manager
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2.  RE: Depreciable Assets

Posted 5 days ago
Hi Roxine -

For the most part, our book lives match tax guidance. I went to our firm that does our tax return and asked them for the most recent tax guidance literature, which should have the drpreciable lives of most assets/classes/types.

I find it interesting that you would like to give your shop mechanics this information? So they purchase these assets and also have a hand in managing the fixed asset schedule?

Thanks,

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Cory Rickard
Controller
Max J. Kuney Company
Spokane WA
(509) 535-0651
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3.  RE: Depreciable Assets

Posted 5 days ago
what happens is that the mechanics will take the transmission out of an older piece of equipment and rebuild it.  During that time of rebuilding it sits in inventory.  What I need them to notify me of is when it is taken out of inventory and placed into service.  I do believe that previously they would just code the transmission to an expense account; however, I have asked them to not code it to expense and instead code it to a fixed asset.  So the question then came up as to what type of items are fixed assets and which are expense.  In oil and gas, it is very simple to pull out the FERC handbook and just give them a listing so I was hoping that some sort of listing existed in construction but it doesn't sound like it is as cut and dry in the construction world.

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Roxine Davis
Accounting Manager
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4.  RE: Depreciable Assets

Posted 5 days ago
​Roxine,

There won't be much of a specific list as to what should be capitalized and what should not. The rules are much more subjective in nature. Generally, where your mechanics are concerned, if the repair changes the function of the asset or significantly increases the life of that asset, then that repair should be capitalized and depreciated (think engine replacements, new truck beds).

The IRS follows a de minimis rule that says if the company receives audited financial statements, purchases under $5,000 can be expensed. If you receive reviewed or compiled statements, or no financial statements at all, the limit is $2,500. You must elect into this de minimis rule every year and it really just provides protection in the face of an audit. This rule is not to say that all expenses in excess of these limits cannot be expensed (if they don't significantly change or improve the asset).

Most of your excavation equipment will have 5 years of depreciable life under IRS MACRS. For our clients (many in excavation) we simply match book lives to tax lives. It makes tracking each asset easier. You should not capitalize assets for book and expense for tax, or vice versa.

We recommend a written policy at each company that generally states how each purchase will be treated. The policies generally follow the rule above, and may provide that any purchase/repair under a certain dollar amount will be expensed, regardless of its purpose.

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Dillon Scott CPA
Construction Tax Accountant
Marcum LLP
Nashville
(615) 245-4058
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