Thanks for the input, it's been very helpful!
If I ever find a day that I own $100 million of CPE, I will be having a
massive Craigslist sale.
On 12/12/2015 10:30 AM, Ken Hohhof wrote:
I'm not qualified to answer that question. If you also capitalized
100 million dollars worth of routers, servers, backhauls and APs, I
don't see why not. After all, you wouldn't depreciate cabling and
J-pipes no much you spent on them in aggregate. If you had thousands
of employees and bought a stapler for each of them, you would still
expense those staplers under "Office Supplies". But if you bought
them all desktop computers, those would probably be capitalized. I'm
not sure about a $200 tablet computer, that kind of sounds like
capital, but the $500 minimum is pretty common.
If your business model is mainly deploying CPE without other
infrastructure, that might be different. Like let's say you buy,
install and own solar panels on customer houses, and your business
model is the customer gets free electricity and you sell the excess to
the grid. You would probably have to treat those solar panels as long
term fixed assets.
There are several things driving this decision. Generally accepted
accounting principles, especially if your company's books will be
audited. And of course tax law, the IRS wants to make sure you aren't
expensing things that should be depreciated in order to offset income
and avoid paying income tax. You want your income statement and
balance sheet to be realistic to support good management decisions.
And if you want a loan, or investors, or to sell the business, those
numbers will have to survive scrutiny.
My logic in not wanting to carry CPE as assets on the books is they
are spread all over at locations not under my control, they can get
damaged or lost or not returned when a customer cancels. If I'm
carrying them as an asset and depreciating them, and I have to replace
them due to damage, or write them off because they don't get returned,
cleaning up the paperwork isn't worth the trouble. You would have to
write down the asset, stop depreciating it, and write off the loss.
It's just not worth it for a CPE costing $50 to $300.
Also, if local government wants to see your books, and you are
carrying 10,000 CPE radios as assets, won't that make them more likely
to assess property tax?
If your business model has most of your investment going into hardware
at customer locations, there might be ways to sidestep the issue.
Like getting the customer to buy the equipment, or leasing it so that
you expense the lease payments rather than owning it.
But if you really anticipate owning $100 million of CPE, you should
consult an accountant and a tax attorney.
-----Original Message----- From: Simon Westlake
Sent: Saturday, December 12, 2015 9:58 AM
To: [email protected]
Subject: Re: [AFMUG] Calculating depreciation
Can you get away with that on a big purchase though? Or is it because
you are buying it in small quantities?
E.g. if I buy 100 million dollars worth of CPE, I can't imagine I'd get
away with expensing it.
On 12/11/2015 11:47 PM, Ken Hohhof wrote:
I have an asset item called "equipment" and an expense item called
"non capital equipment". If it costs less than $500 each or is
likely to be gone, retired or used up before it can be depreciated,
it gets expensed not depreciated. I am reluctant to capitalize CPE.
Routers, servers, APs, backhauls get capitalized if they cost >$500.
My accountant has not complained.
If I purchase something other than equipment, like a vehicle or a
building, it goes in its own asset category and my accountant decides
what depreciation schedule is appropriate. I suppose some big piece
of software might get depreciated, I wouldn't know.
Not sure we are handling financed equipment properly. Typically I
have 3 year $1 buyout leases, I don't own it for 3 years, and then it
appears to be worth $1. With a fair market value buyout, I guess you
could take that and depreciate it, but I would probably argue with my
accountant about a 5 year depreciation schedule on equipment that is
already 3 years old.
Other special categories would be stuff like "goodwill" and
intellectual property. I guess when you pay $1000 per sub for a WISP
whose hard asset have a book value of $1.58, the rest is goodwill and
gets depreciated.
Then there's Section 179.
-----Original Message----- From: Simon Westlake
Sent: Friday, December 11, 2015 10:16 PM
To: [email protected]
Subject: Re: [AFMUG] Calculating depreciation
How are you defining 'like' assets? Would you group together things like
routers and access points? Or are you getting more specific than that?
On 12/11/2015 10:14 PM, Chuck McCown wrote:
There are lots of depreciation methods. Straight line, accelerated,
mass depreciation.
When you acquire assets over time it it is a pain in the ass to have
a schedule for each item.
Mass allows you to throw all like assets into a common pot and take
a percentage of the pot as depreciation expense each year.
That way you don't have to track when they enter.
-----Original Message----- From: Simon Westlake
Sent: Friday, December 11, 2015 8:54 PM
To: [email protected] ; [email protected]
Subject: [AFMUG] Calculating depreciation
When you depreciate your fixed assets, what method do you use to
calculate it?
--
Simon Westlake
Skype: Simon_Sonar
Email: [email protected]
Phone: (702) 447-1247
---------------------------
Sonar Software Inc
The next generation of ISP billing and OSS
https://sonar.software
