Fixed asset real estate

We take depreciation and leasing seriously

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.

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Deep coverage of depreciation and leasing concepts:

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Fixed assets in real estate companies and REITs

A real estate investment company or trust (REIT) typically holds a diverse portfolio of fixed assets, primarily comprising real estate properties. These assets usually include office buildings, shopping centers, apartment complexes, industrial facilities, hotels, and other income-generating properties. Additionally, REITs may also invest in fixed assets such as land, leaseholds, and real estate-related assets like mortgages and real estate securities. Accounting for the variety of fixed assets held by a real estate company or REIT is essential for accurate valuation, effective asset management, regulatory compliance, investor confidence, and risk mitigation. Transparent and reliable financial reporting, specifically including accurate depreciation and lease movements on and off the balance sheet enhances stakeholders’ trust and facilitates informed decision-making.

Land:

Not surprisingly land assets represent a foundational upon which real estate property companies are based. It is a tangible asset with an indefinite useful life and is initially recorded at its purchase cost, including acquisition expenses like legal fees and closing costs. Is real estate a fixed asset? Yes, but land is not subject to depreciation since it does not have a finite useful life. However, any improvements made to the land, such as site preparation or landscaping, may be capitalised and depreciated over their useful lives.

Buildings:

Buildings encompass various structures such as office buildings, shopping malls, residential complexes, industrial warehouses, and hotels. These assets are tangible, subject to depreciation, and recorded at their historical cost, including construction costs, renovations, and improvements. Depreciation is typically calculated using methods like straight-line or accelerated depreciation, reflecting the gradual wear and tear of the building over its estimated useful life.

Leasehold improvements:

These refer to enhancements made to leased properties to meet specific tenant requirements or to enhance the property’s value. These include interior renovations, installations, or modifications. Leasehold improvements are capitalised and amortised over the shorter of their useful life or the remaining lease term.

Furniture, Fixtures, and Equipment:

FF&E encompass movable assets used within real estate properties, such as furniture, lighting fixtures, kitchen appliances, and machinery. Fixed asset real estate are tangible and subject to depreciation over their estimated useful lives, reflecting their gradual obsolescence or wear and tear.

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Flexible, user-friendly presentation of complex functionality:

AssetAccountant – saving you from spreadsheets since 2019

Let’s kick some assets

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Fixed asset depreciation and lease accounting for real estate companies

Fixed asset depreciation and lease accounting play integral roles in the financial management of real estate companies or real estate investment trusts, offering critical insights into asset utilisation, financial performance, and compliance with regulatory standards. Here’s why these aspects are particularly important for real estate companies:

Accurate Asset Valuation:

Depreciation allows systematic allocation of the cost of tangible fixed assets over their useful lives. By recording depreciation expenses, the organisation can accurately reflect the diminishing value of their assets over time. This ensures that the carrying values of assets on the balance sheet are reflective of their economic value, providing stakeholders with a true and fair view of the REIT’s asset base.

Profitability Assessment:

Depreciation impacts the calculation of net income and profitability metrics such as earnings before interest, taxes, real estate depreciation calculator numbers, and amortisation (EBITDA). Proper depreciation accounting ensures that operating expenses accurately reflect the consumption of asset value over time, enabling stakeholders to assess the organisation’s operational efficiency and profitability accurately.

Tax Compliance and Planning:

Depreciation expenses are deductible for tax purposes, reducing the organisation’s taxable income and overall tax liability. Accurate depreciation accounting ensures compliance with tax regulations and maximises tax efficiency by optimising depreciation methods and schedules. Effective tax planning based on depreciation strategies can enhance cash flow and shareholder returns for real estate organisations and their investors.

Asset Management and Maintenance:

Depreciation accounting provides valuable insights into the aging and condition of fixed asset real estate in a portfolio. By tracking depreciation expenses, CFOs and accounting team management can assess the need for maintenance, repairs, or capital improvements to preserve asset value and extend asset life. Timely maintenance and capital expenditure decisions based on depreciation data can optimise property performance and enhance long-term asset value.

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Investor Communication and Transparency:

Accurate depreciation accounting enhances transparency and communication with investors, lenders, and other stakeholders. Investors rely on financial statements to assess the real estate company’s asset quality, financial performance, and growth prospects. Clear disclosure of depreciation methods, assumptions, and estimates provides stakeholders with confidence in the REIT’s financial reporting and management practices.

Lease Classification and Recognition:

Lease accounting standards, such as the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 842, require organisations to classify leases as either operating leases or finance leases based on specific criteria. Proper classification ensures accurate lease recognition, with operating leases resulting in straight-line lease expense recognition over the lease term and finance leases requiring recognition of lease liabilities and right-of-use assets on the balance sheet.

Financial Statement Impact:

Lease accounting affects the presentation of financial statements, including the balance sheet, income statement, and cash flow statement. IFRS 16 requires organisations to disclose lease liabilities and right-of-use assets on the balance sheet, providing stakeholders with a comprehensive view of the real estate company’s lease obligations and commitments. Lease expense recognition on the income statement impacts operating expenses, net income, and key financial ratios, influencing investor perceptions and financial analysis.

Compliance with Regulatory Standards:

Lease accounting standards, such as IFRS 16, aim to improve transparency, comparability, and consistency in financial reporting across industries. Compliance with these standards ensures that organisations adhere to accounting principles and regulatory requirements, reducing the risk of financial misstatements, restatements, or non-compliance penalties.

Risk Management and Decision-Making:

Lease accounting facilitates risk management and informed decision-making regarding lease negotiations, renewals, and terminations. By accurately tracking lease obligations and commitments, real estate investment trusts and other property companies with fixed assets can assess lease performance, evaluate lease versus buy decisions, and optimise lease portfolio management strategies to mitigate risks and enhance profitability.

Priced to meet the market:

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Accounting software in real estate

For real estate investment companies and trusts, the transition from spreadsheets or antiquated Windows desktop software to sophisticated cloud-based real estate accounting software solutions like AssetAccountant represents a pivotal shift towards efficiency, accuracy, and scalability. The adoption of cloud accounting in real estate offers significant advantages for real estate companies, including enhanced accessibility, security, scalability, automation, real-time reporting, and cost-effectiveness. By leveraging cloud technology, real estate investment organisations can modernise their accounting processes, optimise operational efficiency, and drive sustainable growth.

Accessibility and Collaboration:

Cloud software enables real-time access to financial data from anywhere with an internet connection. This accessibility is particularly beneficial for REITs that may have multiple properties spread across different locations. With cloud accounting, stakeholders, including property managers, accountants, and executives, can collaborate seamlessly, view updates instantly, and make informed decisions based on the most up-to-date information.

Data Security and Compliance:

AssetAccountant is internationally data security and ISO27001 certified thus offers robust security measures including encryption, multi-factor authentication, and regular data backups, mitigating the risk of data loss or breaches. This is especially important for businesses handling sensitive financial information and adhering to regulatory requirements such as Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).

Scalability and Flexibility:

AssetAccountant’s real estate accounting software is scalable for those businesses rapidly increasing the number of fixed assets they have on their balance sheet requiring depreciation and/or lease accounting treatment. Whether acquiring new properties, expanding operations, or managing complex financial transactions, cloud software can seamlessly adapt to accommodate increased data volumes and user demands. AssetAccountant offers flexible subscription models, allowing businesses to scale resources up or down as needed, thereby optimising costs and operational efficiency.

Automation and Integration:

AssetAccountant for Australian business and real estate organisations all over the world streamlines repetitive tasks and automates manual processes, reducing the potential for errors and freeing up valuable time for your accounting team. Integration capabilities with popular General Ledger software (I.e. Xero, QuickBooks Online) and ERPs (I.e. Sage Intacct, Microsoft D365)  facilitates seamless data flow and eliminate the need for manual data and journal entry, ensuring data consistency and accuracy across platforms.

Real-time Reporting and Analytics:

Being a contemporary cloud accounting platform, AssetAccountant provides robust reporting tools, empowering generation of real-time financial reports, performance dashboards, and predictive analytics. This real-time insight enables proactive decision-making when it comes to fixed assets, timely identification of trends, and optimisation of financial performance across any property portfolio.

Cost-effectiveness:

AssetAccountant accounting software in real estate will save your accounting teams time and money. The cost savings compared to traditional on-premises’ real estate accounting software eliminates the need for significant upfront investments in hardware, infrastructure, and maintenance. Additionally, our cloud-based subscription models involve predictable annual/monthly fees, reducing the total cost of ownership and enhancing financial predictability.

Why our clients love Asset Accountant

Greg Singh Group Tax Manager, Whitehaven Coal Limited
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“Up until 2021 we had been using Excel spreadsheets to calculate and manage fixed asset tax depreciation for the group's registers, which was not sustainable. To address this and to implement automation of the process, we researched solutions offered in the market, including by the large accounting firms and specialist software providers. After thoroughly vetting AssetAccountant as a vendor, testing the software and its calculations, and reviewing the company’s data security, we committed to implement the software for all tax fixed asset registers for the Whitehaven Coal group. Since implementation we have been very satisfied with the decision. The software is intuitive, robust, easy to use, and accurate. AssetAccountant’s commitment to ongoing development of the product's features has also been impressive.”

Sharon Hughes CFO, Buildsafe
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Sharon Hughes image

"After being introduced to AssetAccountant in 2020 by PriceWaterhouseCoopers, I carefully reviewed the software's functionality to suit our complex fixed asset depreciation and lease accounting requirements. For example Buildsafe acquires, disposes and writes off thousands of assets including partial transactions. We also need flexible reporting and detailed journals. I have found the software to be enterprise standard, robust and precise. The software is a very elegant blend of beauty and smarts. The ongoing support, product development and assistance has been responsive and reliable. An amazing team and product. Thank you."

John Smith CFO & Company Secretary, Dateline Resources Ltd
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John Smith image

"AssetAccountant (AA) has produced the ultimate Fixed Asset Management System. AA integrates seamlessly with Xero and produces reports that satisfies any auditor with easy to trace transactions that are verifiable. The real hidden gem is their Lease Accounting facility which takes all the heartache and time consuming issues out of AASB16. Fantastic product - has literally saved me hours of work."

Suzanne Walker Director, Clear Path Accounting
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Suzanne Walker image

"We love using AssetAccountant. The time savings for every client’s depreciation entries means not only is profit increased on every job, but our additional team capacity can be directed to more valuable work. There is literally no risk in the investment of AssetAccountant fixed asset depreciation software."

Chris J Emerson CPA Emerson Consulting Services LLC
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Chris J Emerson CPA image

"Big Boy Jocks On.... Ever wanted the big company fixed asset system without all the clunkiness and overthinking on the part of the software developers (I'm looking at you Thomson Reuters...)? Well then you need AssetAccountant. It provides just the right mix of complex depreciation calculations and beautiful user interface. It's a system designed by accountants and executed perfectly by developers. The integration is seamless with Xero (you can sign into AA with Xero credentials which is awesome if you are already running Xero on your browser) and journaling synchs are very flexible between the two applications. Then there is the price. I challenge you to find a more robust fixed asset system at these price points. Well done AssetAccountant. You get me. I now have my big boy jocks back on for fixed asset management....and they fit!"

Marco Abril Financial Controller, TPM Builders
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Marco Abril image

"From the initial contact with the team at AssetAccountant to the final implementation, we have received prompt and positive responses. The effective support service and continuous improvement makes AssetAccountant a product highly recommended to a wide variety of industries as well as to accounting firms."

Veenith Singh Group Finance Operations Manager, Beca Group
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Veenith Singh image

"It’s amazing we calculated this year’s depreciation in just a matter of minutes!"

Con Kirgianis Finance Manager, KWP!
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Con Kirgianis image

"Our organisation was looking for a standalone cloud-based fixed asset register that could calculate depreciation for multiple companies. AssetAccountant was a perfect solution that removed the need for tracking assets and calculating depreciation through spreadsheets.

The team at AssetAccountant were very responsive throughout the implementation process. The system is straightforward to use and has various options for both asset tracking and depreciation to make it suitable for most organisations."

Matt Pisarski Global Business Development, Intuit QuickBooks
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Matt Pisarski image

"Now that AssetAccountant is in our app store, our customers and sales team have a cloud option for fixed asset depreciation which has a strong integration with QuickBooks Online."

Kim Stanton Chief Financial Officer, Hardy Aviation
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Kim Stanton image

"After years of “paying a premium” for our Asset Management, we decided to go in-house. More than impressed with the ease and capability of the software, and the staff were a pleasure to deal with from go to whoa. Fabulous to have monthly reporting, as opposed to annual as well."

Alan FitzGerald Founder, Practice Connections
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Alan FitzGerald image

"I have seen a lot of niche products come and go but the one constant has been the lack of a decent fixed asset register. I was recently invited to see the latest incarnation and it did not disappoint. I am confident that both accounting firms and corporate clients will be lining up to use it – I have already been extolling the solutions’ virtues."

Elspeth Mildren Accountant, Lawson Grains
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Elspeth Mildren image

"We initially came across AssetAccountant when researching potential replacements for the Xero asset register. AssetAccountant sparked our interest due to its ability to easily and transparently forecast depreciation, transfer assets between sites, revalue assets and asset part disposals. The AA team have been extremely helpful which has provided us with confidence in the product, we look forward to exploring additional features to find more efficiencies in our processes."

Leanne Spiteri Founder, Virtue Private Advisory
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Leanne Spiteri image

"We highly recommend the use of AssetAccountant. Our clients benefit immensely from accurate asset register records, making spreadsheet accounting (and typical errors) a thing of the past. We can easily maintain tax and accounting registers providing our clients with accurate and meaningful information. AssetAccountant is a breeze to use, and we love that it integrates with QBO and Xero."

FAQs

What is fixed asset depreciation, and how does it apply to real estate?
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Fixed asset depreciation in real estate allows property owners and investors to allocate the cost of their tangible assets, such as buildings and improvements, over time. This process is crucial for reflecting the wear and tear of property assets and ensuring compliance with Australian accounting standards. It also offers tax benefits by reducing taxable income.

What depreciation methods can real estate businesses use in Australia?
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For real estate, businesses typically use the straight-line depreciation method for buildings and improvements. This method allocates an equal amount of depreciation expense over the asset’s useful life, helping to maintain consistent financial reporting in accordance with Australian accounting standards.

How do lease calculation rules impact real estate asset depreciation?
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Real estate businesses that lease assets must adhere to lease calculation rules as outlined by AASB 16 Leases. Leased assets must be included on the balance sheet, with the depreciation being based on the shorter of the asset’s useful life or the lease term. Understanding and applying these rules is essential for accurate financial reporting.

What accounting standards govern fixed asset depreciation in the real estate industry?
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Fixed asset depreciation for real estate in Australia is governed by AASB 116 Property, Plant and Equipment. This standard provides the framework for how real estate businesses should depreciate property assets and ensure compliance with local accounting standards. Accurate depreciation is key to transparent financial reporting and asset management.

How has AASB 16 impacted lease accounting for real estate businesses?
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The adoption of AASB 16 Leases has significantly changed how real estate businesses account for leases. Most leases must now be recognized on the balance sheet, affecting both the asset’s depreciation and the liability recorded. Compliance with lease calculation rules ensures proper financial reporting and asset valuation.

What types of real estate assets can be depreciated in Australia?
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In Australia, real estate businesses can depreciate assets such as buildings, structural improvements, and property-related equipment. Depreciation for these assets must follow the guidelines set by the Australian Taxation Office (ATO) and align with the relevant accounting standards.

Why is fixed asset depreciation important for real estate businesses?
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Fixed asset depreciation allows real estate businesses to reflect the gradual loss of value in their assets on the profit and loss statement, reducing taxable income. It also affects the balance sheet by showing the decline in the book value of assets over time. Properly managing depreciation ensures compliance with Australian accounting standards and helps businesses maintain accurate financial records.