Regardless if your assets were purchased through Stock or Asset acquisition, the costs for the internal/GAAP assets will change. However, if your M&A was a stock purchase, all of your Federal Tax, State and AMT values need to remain as they are and continue forward with their original values, methods, lives and placed in service dates. Whereas an asset purchase, they all change.
When I review clients' data after an acquisition, I often notice 'value adjustments' or 'top side' entries to record the new values (and lives), by asset class or GL Asset Account. These are easy to spot on sub-ledgers, but not easy to manage on a go forward basis.
Some common problems with this practice are:
- Reconciling issues across depreciation books
- If you are outsourcing your Tax depreciation, this can turn into a nightmare - Reconciling problems down to the individual asset level
- Essentially, this creates multiple 'assets'
- Disposal tracking and ensuring that all assets get disposed properly
- Even a partial disposal will be problematic to the 'adjusted' entry - Transferring assets across companies
- Asset adjustments/impairments
- Physical inventory reconciliation
- Property tax schedules
- Insurance claims
- Cost Segregation Studies
As you can see, it is extremely important to take the time to reconcile down to the asset level whenever possible. If you don't receive your FMV study or NBV down to the asset level, but instead, by asset Class/Type, GL Asset Number or any other combination, at least take the time to allocate the values. Besides, the cost is not the only thing that changes. Your assets get a new placed-in-service date and a new life (either remaining or start over). It may be a big task, but you will love that you did it later.
In addition, if you have multiple companies getting revalued, take the time now to either implement a software that will take care of both GAAP and TAX depreciation and/or revisit how you are tracking and recording your assets. Now would also be the perfect time to look at field, reporting and workflow consistencies Ensure everyone is on the same page going forward. This will create a successful fixed asset management process.
Last, but not least, remember to update your calendars to correctly calculate your new short year!
About Angie Chase
A pioneer in Sage Fixed Assets since 1998, Angie Chase lives, eats and breathes all things fixed assets. With extensive software and in-field experience on all the Sage Fixed Asset solutions, her knowledge and creativity allows her and her clients to explore endless possibilities on getting full use out of their Sage investment. Angie owns and runs her own fixed asset consulting firm and has developed a handful of Sage Fixed Asset add-ons and additional integration options.
About Fixed Asset Consulting, LLC
Offices located in Eugene and Portland, Oregon. Providing fixed asset management solutions, such as the Sage Fixed Asset product lines, training, data conversions and reconciliation projects, consulting on physical inventory audits, fixed asset management outsourcing services, and a wide array of additional fixed asset consulting services for 20 years. Serving small, mid‐sized to large Fortune 100 companies all over the United States and other countries when necessary.
Learn more at https://fixedassetconsulting.com | www.fixedassetsoftware.com