Determining Asset Life or Depreciation Life for M&TE

wesatwork

Learning what I can.
#1
I am procuring M&TE in a R&D setting with servo-hydraulic and mechanical test frames that beat the snot out of parts till they break or meet fatigue criteria. An accountant wants the asset life for this M&TE to be 14 years. I was thinking way under that based on my experience in this setting (6 years). That got me wondering if there are any rules of thumb out there or generally accepted depreciation life cycles for M&TE.

It seems that two groups could be identified:
1) the actual measurement equipment in active use on machines, similar to production M&TE possibly.
2) the working standards used to calibrate the M&TE used either in a lab setting or in situ

Any thoughts on this?
 
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Ninja

Looking for Reality
Trusted Information Resource
#2
Re: Asset Life or Depreciation Life

I'm not an accountant...but I guide some of the depreciation estimates in my area...take it for what it's worth...

Two things factor in:
1. Financial advantage for longer or shorter Depr. life. This tends to be guided by other, non-related factors such as profitability, one time write-downs, etc....

2. Reality. The IRS frowns on using clearly incorrect numbers for financial gain (ie. avoiding/lowering taxes). The stated life has to be reasonable...that gives you a window to play in, not a number...but if you claim 30yrs on a computer, it won't go over well.

Your accountant wants a longer depreciation life...now you know what side of the window to play on... talk with the accountant about reality and why you think it is too long...then (IMO) let them use whatever time they want. If it goes bad later, it will be the accountant giving answers...let him/her do his job with all the facts you can provide.
Insisting they use the number you are comfortable with isn't the right approach...but educating them from your more realistic knowledge can guide them away from an obvious error.

HTH
 
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