Board Directors: Consider this Before Approving Financial Statements

October 5, 2020
Posted by: admin

Incorrect Asset valuation can distort financial results, could be prosecuted as fraud and is an ATO risk and focus area!

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Does your entity or entities have ‘legitimate’ Fixed Asset Registers?

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Are you confident the Fixed Asset Registers you are using is tax and accounting compliant?

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Are the asset depreciation calculations correct (ATO finds many errors in ‘spreadsheets’)?

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Are your registers integrated with QuickBooks Online?

Incorrect asset valuation

Inventory, fixed assets, and accounts receivable may be wrongly stated to inflate company performance.

Inventory, fixed assets, and accounts receivable may be wrongly stated to inflate company performance.

Your clients do not need to be expert in financial reporting requirements. If they were, why would they need you? And at the same time, many boards are deliberately appointing directors from a range of backgrounds to give the board diversity.

But not being a financial reporting expert does not absolve business owners or directors of their duty to ensure:

  • Appropriate expertise is applied;
  • Due processes are sound;
  • Essential elements of the methods are scrutinised and tested; and
  • Tax and accounting treatments are used appropriately.  See: Accounting Depreciation Versus Tax Depreciation for Assets

So, before you ask your client to approve the company financial statements and the valuations and depreciation of fixed assets, you should ask yourself:

Do the financial statements make sense and present the results, cash flows and state of affairs of the company realistically?

What are the risk areas that the ATO and other scrutineers know to focus on as areas of risk; like the Fixed Asset register.

Am I confident to explain or defend the asset valuation/depreciation if challenged?

If you are using a spreadsheet for anything other than a ‘few simple assets’, be prepared for particular attention!

Fixed Assets – Risk Focus Areas

A recognised major concern, as noted in the ATO Interim findings report top 100 program, is whether assets are recorded in the tax and financial statements at an appropriate amount. That is, not exceeding their recoverable amount or under-valued for advantage.

We are seeing instances of the incorrect application of effective lives, incorrect calculations and accelerated depreciation. We also have concerns with the use of automated software where the outcomes may not be compliant with the law, the incorrect use of project pools, and the incorrect treatment of balancing adjustments on disposals.
Australian Tax Office

Interim Findings Report Top 100 Program

Fixed Assets and the Fixed Asset register

To help you address your concerns about your current Fixed Asset register and the values populating the financial statements, here are a few focusing questions:

Is your Fixed Asset register up to date with current law?

Have fixed assets in the Fixed Asset register been depreciated appropriately?

Is your Fixed Asset register an Excel (or similar) spreadsheet?” (If yes, be alarmed)

Is each formula in the ‘spreadsheet’ that has been used, for years, correct for today?

Fixed assets management includes all the policies and procedures that aim to manage fixed assets throughout their useful life, and when disposing of that fixed asset. A Fixed Asset register, whether paper, spreadsheet or software needs to support these outcomes – accurately.

AssetAccountant™ Provides Effortless Accounting AND Tax Depreciation

As you address the risk that the current Fixed Asset register may be deficient or subjecting clients to an avoidable risk, here is how AssetAccountant™ can help:

  • AssetAccountant™ provides an integrated, cloud-based fixed asset register for managing depreciation.
  • AssetAccountant™ combine Tax and Accounting rules with modern interfaces to simplify the process of creating and maintaining fixed asset registers.

  • AssetAccountant™ is designed to suit businesses of all sizes.
  • AssetAccountant™ offers assurance that, when accurate data is entered, the outcome will be legislatively and financially compliant.

What is your level of confidence that your current Fixed Assets register is delivering accurate and complete information for inclusion in your QBO generated financial statements?

But everyone is so busy!

We hear you. This has been a crazy year.

Every finance department, in every business, large and small, has had to deal with COVID-19, constant changes, updates, interpretations of support and incentives – phew!

It is almost impossible for even the most diligent finance team to keep up with all the urgent work, and it is likely that maintaining the Fixed Assets register keeps getting bumped down the list.

So why not streamline something that can be time-consuming and cumbersome?

Experts here to help

We don’t want to add to the finance departments burden.

We want to make both Fixed Asset register conversion and maintenance easier both now and into the future, with:

Free Asset Register Conversion

We’ll take care of converting your existing fixed asset register.

Chart of accounts mapping

Do it yourself, or we can help, with mapping your chart of accounts directly to AssetAccountant™, ensuring your future journal entries post effortlessly and accurately (no re-keying errors) to your QBO ledger.

Compliance updates

We constantly monitor the ATO and make the updates without your finance team needing to understand the ‘ins and outs’ or needing to make changes to the Fixed Asset register themselves.

AssetAccountant™ can help you and your business to manage risk, time and give you confidence in the quality and compliance of the Fixed Asset register and financial reports.

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on 1300 984 378

How can we help you?


This tax time, are you confident your asset registers are accurate?

ATO targets fixed asset depreciation
October 4, 2020
Posted by: admin

In the past year, the ATO has highlighted Fixed Assets (property, plant and equipment) as a tax risk!

“Each year the ATO identify and communicate tax risks to the market. The ATO make clear they will seek to understand and review the income tax treatment of activities, and “look for and review risks or concerns communicated to the market and determine if they are present”.

In the past year, the ATO has highlighted Fixed Assets (property, plant and equipment) as a TAX RISK!

The ATO has specifically flagged:

  • Incorrect application of effective lives,
  • Incorrect calculations and
  • Accelerated depreciation.

As areas of concern.

Uniform capital allowances – this is usually a large area of assurance for capital intensive Top 100 taxpayers as they own a high percentage of fixed assets (property, plant and equipment). We are seeing instances of the incorrect application of effective lives, incorrect calculations and accelerated depreciation. We also have concerns with the use of automated software where the outcomes may not be compliant with the law, the incorrect use of project pools, and the incorrect treatment of balancing adjustments on disposals. It is important that there are appropriate internal systems and good governance practices to record assets, and to calculate effective lives and depreciation. We will ask to see the tax fixed asset register and the working papers, and we will also verify original cost and adjustable values for high value assets.

We are seeing instances of the incorrect application of effective lives, incorrect calculations and accelerated depreciation. We also have concerns with the use of automated software where the outcomes may not be compliant with the law, the incorrect use of project pools, and the incorrect treatment of balancing adjustments on disposals.
Australian Tax Office

Interim Findings Report Top 100 Program

AssetAccountant™ Provides Effortless Accounting AND Tax Depreciation

  • AssetAccountant™ is a comprehensive cloud-based fixed asset register written by Accountants for Accountants.
  • AssetAccountant™ combines sophisticated interpretation of Tax and Accounting rules with modern user interface design, to greatly simplify the process of creating and maintaining fixed asset registers.

  • An AssetAccountant™ cloud subscription completely automates accounting and tax depreciation calculations for all fixed assets.
Priced to suit businesses and Accounting Firms of all sizes, AssetAccountant™ is currently available in Australia and New Zealand.

Request a Demo, register for a Webinar, secure a Free Trial

Or just call our friendly team
on 1300 984 378

How can we help you?


Video: FULL PRODUCT DEMO for QuickBooks Online advisors June 2020

October 4, 2020
Posted by: admin

Demonstration of AssetAccountant™ – Transcript

Good morning, everyone and welcome to AssetAccountant™ – depreciation made easy for QuickBooks Online advisors.

AssetAccountant™ is a new product to the market we’ve just released. It’s a fixed asset depreciation product, and we believe it’s best in class.

It is cloud based and is the next iteration of a 20 year legacy product for PC desktop used by Big four accounting firms, second tier accounting firms and corporates also.

We’ve just released the cloud product, and we’re really excited about our partnership with QuickBooks Online.

The product is currently available in Australia and New Zealand (at June 2020) and live from this week.

I’ll keep this presentation component to a minimum so we can jump into the product and have a look, but we’ve really designed the product to provide a clear reconciliation between accounting and tax and compliance with ATO and IRD rules.

It provides clear automation of depreciation calculations and the seamless integration makes posting of journals into QuickBooks Online a one-button step.

We are really excited to have entered a partnership with Intuit QuickBooks Online.

Australian Tax Methods of Depreciation

Right, just before we jump into the product I want to touch on the Australian tax methods.

I’ll go through the functionality in the product demonstration, but we won’t have time today to go through all of the Australian tax methods.

In addition to having the usual 200% Diminishing Value and Prime Cost methods, we’ve also got full and immediate deductions.  The ability to flag R&D assets. Div43 so you’re okay for building and construction allowances, luxury motor vehicle limits, low value pools, software pools, and small business pools are all up and running and we’ll go through the low value pools today.  Black hole expenditure for section 4880, and the ability to track that through to the fixed asset register and reconcile that back to your balance sheet. Intangibles and primary production are coming in a future release and the ability to separate those out. And in particular, the ability to tag primary production versus non-primary production assets and incorporate specific primary production methods. And this week we’re very happy to announce that we’ve launched the Backing Business Investment (BBI) components for AssetAccountant™ as well. So you can now claim your 50% up to the $150,000 upfront up until 30 June. And we’re currently extending that to 31 December per the government’s announcement. We’re just waiting on the legislation.

AssetAccountant™ Demonstration & QuickBooks Online Integration

So rather than bore you with slides, we’ll jump into the product.

It has very simple dashboard on introduction. You have the ability to see your asset groups and to show you the link to QuickBooks Online – if I go into register settings and come across to my integrations tab, you’ll see that I’m actually connected to a QuickBooks Online file.

So if you’ve only got one QuickBooks Online file, it will link directly using the same login that you use for AssetAccountant™. If you’ve got multiple files, you can select the files you want to see / connect to. We’ve got a selection of pools for any register – low-value pools, small business pool, we also cater for software pools. Coming shortly, will also be project pools.

One of the advantages we have with AssetAccountant™ is the ability to have unlimited users.

This includes giving your clients access to their own fixed asset registers, which is something that be very new for a lot of clients.

In your asset groups you will see we have some traditional asset groups already set up.

For example motor vehicles at cost, computer equipment at cost.

See how we are able to set up standard naming conventions, asset types, reporting categories for links back to the balance sheet, whether or not the group is subject to capital gains tax, what capital allowances disclosures we want on our tax returns. So what I might do quickly is just set up a new group and link that easily to QuickBooks Online.

I’ll set one up called Land and buildings. For my reconciliation to my balance sheet, I might want to disclose this separately on the face of my balance sheet or as part of my property plant and equipment. So for this particular example, I’m going to disclose it as part of our property plant equipment. Let’s say this one is subject capital gains tax and it is in “other tangible assets” category. We’re going to have no depreciation being land and buildings, or I can select my division 43 for building and construction. That’s for the tax method. I can also select my standard accounts depreciation method, which is prime cost. Now this is how easy it is to link to QuickBooks Online.

For my clearing of suspense account, I simply select link to QuickBooks Online. It brings up my QuickBooks chart of accounts. I select “assets suspense” then link the account. So for land and buildings – you’ll see I don’t currently have a land and buildings account. I can actually create a new account from within AssetAccountant™ for QuickBooks Online.

So this is my land and buildings at cost. It’s a fixed asset. I can select the subtype. Now for subtypes we do allow selection of those, but as most of you would know, they really don’t have much importance here in Australia.

No I just create my new account. I can select that account and link it. I’ll create a new account for my land and buildings accumulated depreciation. It’s a fixed asset so again I’ll put that as Land, then create my new account and link to that account.

Linking the Profit & Loss is just as easy. You’ll see that the chart of accounts has already been filtered by the P&L accounts. I select my depreciation. I can select my immediate claim. And you’ll notice here that we’ve split profit and loss. Some accountants like to show profit and loss separately in the P&L whilst others will show it as a combined account. I’m actually showing it as a combined account so I can map the same account to both locations.

So as you can see this is a very simple process. And that’s really all there is for setting up and setting up your accounts mapping.

Other AssetAccountant™ Features (assets, transfers, pools, write-offs, reassessments, importing new assets, tax and accounts views)

I’ll show you how the journal entries work shortly, but first of all, I wanted to take you through the rest of AssetAccountant™. We have a list of all of our assets. I’ve actually processed this asset register right through to 31 May, and we’ve got the June updates ready to process. Now I bring up my complete list of all of my assets.

If look at my asset summary here’s a list of all the assets I’ve already taken up into the register. I’ve got motor vehicles, for example, so I can open up any asset. We see we’ve got the depreciation calculations for each month right through to 30 June, but let’s say I wanted to sell this vehicle. I just simply press the sale button, sell it as of yesterday for $3,000. You’ll see, I’ve now got a deductible balancing adjustment, being the loss on disposal. I can switch between my accounts view and my tax view very easily.

For accounts I’ve also got a loss for the sale. I’ll now jump into another asset.

Let’s pick a computer for example, you’ll see that it’s already in the low value pool for tax purposes, but for accounting, if I want to, I can reassess that asset and its useful life. I can also write off that asset. Let’s for this example write that off as of yesterday. Say the laptop has been lost or stolen, I can write that off also. And you’ll see that for accounts, I now have a loss on disposal for that asset whereas for tax this asset is already in the low value pool.

Our low value pool looks exactly as you’d expect the low value pool to work, we’ve got new additions being transfers – assets that were eligible to be transferred this year based on the written down value on 01 July 2019 being less than a thousand dollars.

We’ve got new additions, which are purchases up until 31 May. And what we might do is import some purchases in June. We’ll do that through Excel. Now I’ve already set up a standard Excel template. I’ve mapped that across. I simply import my assets. Here they are ready to process and I can process the import.

So that import has now being processed for this month. If I come back to my low value pool assets you will see that I’ve got eight new eligible transfers from the purchases. So to transfer those into the low value pool, it’s just as simple as going through and selecting them for transfer to low value pool. From an assets perspective, we now have all of our additions and disposals processed right up until 30 June.

Easy Posting of Journals (and adjusted journals)

Now I can run my journals. So we’ve already processed our accounts for May so I can create my journal. I just simply select it. And you’ll see there’s our profit or loss on disposal from before (being a loss). We put our accumulated depreciation and impacts from the sale.

We have a depreciation expense for each category and posting to QuickBooks Online is really as simple as pressing the post to QuickBooks Online button. Now you’ll see, it’s actually brought me up with the journal number. And if I click on that journal, I’m already logging into QuickBooks Online. You’ll see, here’s my journal entry and that’s journal entry number 9 that has just being processed and posted. That’s how easy it is to process journal entries in AssetAccountant™ to QuickBooks Online. Now let’s just say for instance, that I’ve actually forgotten to add an asset. And I had my new buildings asset group. I’ve mapped it, but I’ve actually forgotten to take up my land.

And let’s say that land had a cost of $1m, a purchase date of yesterday, but a capital gains tax date of 1st of April when we purchased it. So we can track all of our CGT here as well. Now because it is land, there is no depreciation. So that’s very simple to set up. Save, processed and very straightforward. So while we’re here, let’s say we also have forgotten to take up a motor vehicle.  Let’s say that it was $120,000 and was purchased on the 1st of June. And because it was purchased after the 12th of March, we’re entitled to the accelerated depreciation under BBI. So you’ll see that it’s straightaway, it’s defaulted to the luxury motor vehicle diminishing value for the Backing Business Investment Allowance for our standard eight years Effective Life.

So if I save that, you’ll see that for tax purposes, we’ve applied the capital in it. And then we’ve claimed the 50% Backing Business Investment (BBI) that we are entitled to claim on the date of purchase. If we need to reassess the useful life of an asset at any point in time, I can simply select the reassess button and it will reassess that at any point in time, including reassessments made for future dates. But now that we’ve taken up two assets and our journals have been processed, we’ve got to post adjusting journals for June. Normally you would need to go and actually manually process those journals. We have setup AssetAccountant™ and its integration with QuickBooks Online so that it will actually pick up just the movements since the last journal has been posted. So it’s as simple as clicking create – and you’ll see that we’ve got our $120,000 motor vehicle, a million dollars in property and the accounting depreciation expense. So we do run separate accounting and tax books. So if I post that to QuickBooks Online, you’ll see that has posted straight through. Then click on the journal entry and you can see the new journal entry posted straight to QuickBooks Online.

Summary

The integration is really that easy. At the period end we want to run the reporting on the accounts view to support our financials. For example, here is our group summary, which should help us line up to our balance sheet. We have asset summaries, asset schedules, acquisitions, or disposal summaries, and coming very shortly will be a depreciation forecast for 12 months up to 10 years.

We have a standard export to Excel, basically exports all of our assets it’s exactly as is.

There is our Profit & Loss on disposal of the asset for example.  You will see we’ve got the summary level there also.

So AssetAccountant™ is very simple to use. And it’s designed for any fixed asset registers for individuals, private wealth clients and businesses and corporates.

We easily handle registers ranging from just a handful of assets (less than five) all the way through to several thousand assets.

Request a Demo, register for a Webinar, secure a Free Trial

Or just call our friendly team
on 1300 984 378

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Is AssetAccountant™ Worth It?

AssetAccountant vs Excel
October 4, 2020
Posted by: admin

“I only have a few assets – is an AssetAccountant™ subscription worth it?”

Yes!

Even if you manage a small asset register, an AssetAccountant™ subscription is DEFINITELY worth it

The comparisons below are a guide for you to compare with how you manage your asset register.

Feel free to crunch the numbers below replacing ours with your own numbers and estimations.

Whatever numbers you come up with yourself, and no matter how you manage your assets now, AssetAccountant™ makes depreciation easy for fixed asset accounting for even the most complex fixed asset registers.

** We’ve based the below example on a small register of around 5-7 assets currently using Microsoft Excel, posting depreciation journal entries monthly to benchmark accounting software such as QuickBooks Online.

AssetAccountant vs Excel Comparison

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Asset Depreciation Definitions

October 4, 2020
Posted by: admin

What is a Depreciating Asset?

A depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used.

Depreciating assets include such items as computers, electric tools, furniture and motor vehicles.

Land and items of trading stock are specifically excluded from the definition of depreciating asset.

Most intangible assets are also excluded from the definition of depreciating asset.

Adjustable value

A depreciating asset’s adjustable value at a particular time is its cost (first and second elements) less any decline in value up to that time.

The opening adjustable value of an asset for an income year is generally the same as its adjustable value at the end of the previous income year.

Balancing adjustment amount

The balancing adjustment amount is the difference between the termination value and the adjustable value of a depreciating asset at the time of a balancing adjustment event.

If an asset’s termination value is greater than its adjustable value, the difference is generally an assessable balancing adjustment amount.

If the termination value is less than the adjustable value, the difference is generally a deductible balancing adjustment amount.

Car limit

If the first element of cost of a car exceeds the car limit for the financial year in which you start to hold it, that first element of cost is generally reduced to the car limit. The car limit for 2018–19 is $57,581.

Days held

Days held is the number of days you held the asset in the income year in which you used it or had it installed ready for use for any purpose.

Decline in value

Deductions for the cost of a depreciating asset are based on the decline in value. For most depreciating assets, you have the choice of two methods to work out the decline in value of a depreciating asset: the prime cost method or the diminishing value method.

Depreciating asset

A depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used.

Decline in value

Effective life: Generally, the effective life of a depreciating asset is how long it can be used by any entity for a taxable purpose or for the purpose of producing exempt income or non-assessable non-exempt income:

Having regard to the wear and tear from your expected circumstances of use assuming it will be maintained in reasonably good order and condition, and
Having regard to the period within which it is likely to be scrapped, sold for no more than scrap value or abandoned.

First element of cost

The first element of cost is, broadly, the amount paid (money or the market value of property given) or the amount taken to have been paid to hold the asset. It also includes amounts incurred after 30 June 2005 that are taken to have been paid for starting to hold the asset. The amounts must be directly connected with holding the asset.

Holder

Only a holder of a depreciating asset may deduct an amount for its decline in value. In most cases, the legal owner of a depreciating asset will be its holder.

Indexation

Indexation is a methodology used in calculating a cost for capital gains tax for depreciating assets acquired before 21 September 1999 that have been used partly for a private purpose.

Second element of cost

The second element of cost is, broadly, the amount paid (money or the market value of property given) or the amount taken to have been paid to bring the asset to its present condition and location at any time, such as the cost incurred to improve the asset. It also includes expenses incurred after 30 June 2005 on a balancing adjustment event occurring for the asset, such as advertising or commission expenses.

Start time

A depreciating asset’s start time is generally when you first use it (or install it ready for use) for any purpose, including a private purpose.

Taxable purpose

A taxable purpose is the purpose of producing assessable income, the purpose of exploration or prospecting, the purpose of mining site rehabilitation, or environmental protection activities.

Termination value

Generally, the termination value is what you receive or are taken to receive for an asset as a result of a balancing adjustment event. For example, the proceeds from selling an asset would be the asset’s termination value.

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4 Most FAQs About AssetAccountant™

October 3, 2020
Posted by: admin

4 Most Asked FAQS

An AssetAccountant™ subscription will save tax advisors and bookkeeping professionals time and therefore money addressing their client’s asset registers.

Sophisticated treatment of Australian Accounting and Tax Rules gives confidence depreciation calculations are right every time.

We’ll update this list with time, but these are currently the 4 most asked FAQs we are receiving.

What depreciation methods are handled by this FAR software?

Does AssetAccountant™ handle pools and how?

Does AssetAccountant™ post journals automatically?

Does AssetAccountant™ integrate with QuickBooks Online?

What depreciation methods does AssetAccountant™ handle?

AssetAccountant™ offers a complete suite of depreciation methods for both Accounting and Tax. These include

  • Diminishing Value (150% and 200% cost basis).
  • Prime Cost / Straight Line.
  • Luxury Motor Vehicle (with full representation of annual caps).
  • Div 43 (building and construction).
  • Immediate (instant asset write-off).
  • No Depreciation.

Does AssetAccountant™ handle pools?

AssetAccountant™ provides detailed treatment of the pools defined by the ATO – the Low Value Pool, Small Business Pool and the Software Pool. Aside from producing exportable reports detailing annual pool opening balances, additions, transfers and closing balances, AssetAccountant™ also manages common ‘edge’ cases such as:

  • Pool Write-offs.
  • Pool Transfer Reversals.
  • Balancing Adjustments for Pools with a negative balance.

Does AssetAccountant™ produce journals?

AssetAccountant™ produces detailed journals on cost, accumulated depreciation, depreciation expense, profit and loss on disposal and more. Journals can be exported to excel or posted directly to QuickBooks Online.

Does AssetAccountant™ map to my QuickBooks Online chart of accounts?

Our integration with QuickBooks Online allows you to access your chart of accounts and map them directly to AssetAccountant™, ensuring that your journal entries map effortlessly to your ledger.

Request a Demo, register for a Webinar, secure a Free Trial

Or just call our friendly team
on 1300 984 378

How can we help you?