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We undertake detailed modelling of fixed asset depreciation and lease calculation rules for both accounting and tax.
We monitor changes to ATO tax rulings and accounting standards like IAS 16 and IFRS 16 so you don’t have to.
And, of course, we are ISO27001 certified.
Fixed asset depreciation and lease accounting is important to the hospitality industry. Fixed assets, or long-term tangible assets, provide the physical infrastructure necessary for hospitality businesses to deliver services. These fixed asset hospitality types typically include land, buildings, furniture, fixtures, equipment, and vehicles. Each category of fixed assets requires specific accounting considerations, that AssetAccountant’s fixed asset depreciation and lease accounting software provides, to ensure accurate financial reporting and effective fixed asset in hotels financial management.
Land: Is a fundamental fixed asset hospitality type, providing the base for buildings and other facilities. Unlike other fixed assets, land is not depreciated because it does not wear out or become obsolete over time. However, land improvements, such as landscaping, parking lots, and fencing, are subject to depreciation. Proper accounting treatment involves capitalising the cost of land acquisition and any initial improvements, then systematically depreciating the improvements over their useful life.
Building and structures:are fundamental to the operations of the hospitality industry, which includes hotels, resorts, restaurants, and other related establishments. These assets are valued at their purchase price, legal fees, and any expenses incurred to make them operational. Depreciation is calculated over the useful life of the building, which can be influenced by factors such as construction quality and intended use. It is important to periodically reassess the useful life and residual value of these structures for accurate financial reporting.
Furniture, fixtures, and equipment (FF&E): Are important in both the functionality and visual appeal of hospitality establishments. This category encompasses a wide range of items, including beds, chairs, tables, lighting fixtures, and kitchen appliances. These assets are recorded as capital expenditures at their purchase cost and are gradually depreciated over their anticipated useful lives, which usually span from three to ten years. Due to the constant need for updates in order to stay competitive and create attractive environments, the hospitality industry must carefully handle the replacement and depreciation schedules of FF&E assets.
Leasehold improvements: are enhancements made to leased properties, such as interior renovations, customised installations, and additional facilities. These improvements are capitalised and depreciated over the shorter of the lease term or the useful life of the improvements. Accurate accounting for leasehold improvements ensures that the costs are matched with the periods benefiting from the improvements, providing a true reflection of the business.
Technology and communication systems: Modern hospitality operations heavily depend on technology and communication systems to provide efficient service and satisfy guests. These resources encompass property management systems (PMS), point of sale (POS) systems, reservation systems, and telecommunication equipment. Due to the rapid pace of technological advancements, these resources often become outdated quickly and have shorter lifespans. By capitalising the costs of acquiring and implementing these systems, and then systematically depreciating them, accurate financial reporting is ensured, and timely technology upgrades can be made.
Vehicles: used in hospitality operations, such as shuttle buses, maintenance trucks, and guest service cars, are critical for providing comprehensive services. These assets are capitalised at their purchase cost and depreciated over their useful lives, typically five to seven years. Proper accounting for vehicles includes tracking maintenance expenses and residual values to ensure efficient asset utilisation and replacement planning.
Recreation and leisure equipment: Hospitality establishments, such as resorts and high-end hotels, frequently allocate funds towards acquiring recreational and leisure amenities to elevate the overall guest experience. This fixed asset hospitality type encompasses items such as pools, gym gear, golf carts, and spa amenities. These amenities are recorded as assets and undergo depreciation in accordance with their expected useful life, which is determined by factors like usage and upkeep. Proper accounting practices entail routine evaluations of their state and residual worth, guaranteeing that the asset portfolio stays in line with guest demands and industry norms.
The sound accounting treatment of fixed assets is essential for financial accuracy, regulatory compliance, and strategic asset management. By meticulously accounting for land, buildings, FF&E, leasehold improvements, technology systems, vehicles, and recreational equipment, hospitality businesses can ensure accurate financial reporting and effective resource allocation. Implementing robust capitalisation policies, appropriate depreciation methods, and regular asset revaluation practices further enhances financial transparency and operational efficiency, ultimately supporting sustainable business growth and competitive advantage.
Capitalisation Policies: Establishing clear capitalisation policies helps in distinguishing between capital and operating expenditures. This involves setting thresholds for capitalisation, defining the types of costs to be capitalised, and ensuring consistent application across the organisation.
Depreciation Methods: Selecting appropriate depreciation methods is vital for accurate expense recognition. Common methods include straight-line depreciation, which allocates an equal expense over the asset’s useful life, and accelerated depreciation methods like double-declining balance, which front-loads the depreciation expense. The chosen method should reflect the asset’s usage pattern and economic benefits.
Regular Revaluation and Impairment Testing: Periodic revaluation of fixed asset in hotels and other industry businesses helps in aligning book values with market values, ensuring the balance sheet reflects true asset worth. Additionally, impairment testing is crucial to identify any significant declines in asset value, ensuring timely recognition of losses and preventing overstatement of asset values.
Compliance with Accounting Standards: Adhering to relevant accounting standards, such as the International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP), is imperative for accurate financial reporting. These standards provide guidelines on capitalisation, depreciation, revaluation, and impairment, ensuring consistency and comparability of financial statements.
AssetAccountant’s contemporary cloud-based fixed asset software for hospitality businesses both large and small, offers superior real-time access, accuracy, scalability, security, automated maintenance, advanced reporting, and regulatory compliance compared to traditional spreadsheets and the widespread us of old desktop hospitality accounting software in the industry. These advantages make our cloud-based solution a more effective and efficient choice for managing fixed assets, supporting better financial management and strategic planning for businesses in the hospitality industry.
Real-Time Access and Collaboration: AssetAccountant provides real-time access to hospitality fixed asset data from any location with an internet connection. This is a significant improvement over desktop software, which typically restricts access to a single physical location. Spreadsheets, while portable, are often subject to version control issues and can become outdated quickly. AssetAccountant facilitates seamless collaboration among team members, ensuring that everyone has access to the most current data and can work together efficiently without the need for manual updates or data reconciliation.
Enhanced Accuracy and Reduced Errors: Spreadsheets are prone to human error, especially as data sets grow in size and complexity. Manual data entry, formula mistakes, and version control issues can lead to significant inaccuracies in fixed asset accounting. AssetAccountant, on the other hand, automates many of these processes, reducing the risk of errors. Automated depreciation & lease schedule calculations and periodic journal posting ensure that the data is accurate and up-to-date, minimising the potential for costly mistakes.
Scalability and Flexibility: As businesses grow, their fixed asset management needs become more complex. AssetAccountant offers scalability that spreadsheets and desktop software cannot match. It can handle an increasing number of assets and users without performance degradation also providing flexibility to adapt to changing business requirements, such as integrating with other enterprise systems (E.g., our growing list of ERP/GL integration partners including for lease accounting Microsoft D365) and supporting diverse asset categories and accounting standards.
Security and Data Protection: Data security is a critical concern for any business. AssetAccountant has invested heavily in robust security measures, including encryption, regular backups, and fully audited compliance with the ISO27001 international data security standard. In contrast, spreadsheets and desktop software often lack these advanced security features, making them more vulnerable to data breaches and loss. Sensitive financial data is protected against unauthorised access and accidental loss, giving hospitality businesses peace of mind.
Automated Updates and Maintenance: AssetAccountant eliminates the need for manual updates and maintenance, which are often required with desktop software. Regular software updates are rolled out ensuring that the system is always running the latest version with the newest features and security patches. This reduces the burden on IT departments and ensures that users have access to the latest tools and functionalities without interruption.
Comprehensive Reporting and Analytics: AssetAccountant has a full suite of inbuilt reporting and analytics capabilities that surpass those available in spreadsheets and desktop software. The enhanced reporting capabilities support better decision-making, allowing businesses to optimise asset utilisation, forecast future needs, and identify cost-saving opportunities.
Fixed asset depreciation software and lease accounting software. Saving you from spreadsheets since 2019.
