Furniture equipment, fixtures, and furniture (abbreviated as FFE or FF&E) is a term used to describe movable furniture fixtures, furniture, or other equipment that has no connection with the building’s structure. These are items that include chairs, desks computers, electronic equipment as well as bookcases, tables and partitions, usually decrease in value over the course of their usage, but they are nonetheless essential costs to be considered when valuing a business, especially during liquidation or liquidation events. 1
These are items that are sometimes called furniture as well as fixtures or equipment (FF&A).
Furniture, Fixtures, and Equipment Explained
A resource is considered to be an FF&E asset if it’s utilized by a business to conduct its routine activities. For instance the office receptionist depends on their desk, chair phone, computer desk organizer, pen holder for their routine tasks throughout the process of running a business.
Accountants classify FF&E into tangible assets as distinct line items in financial statements as well as the other forms of budgeting. It is the FF&E surplus is incorporated to the total cost of a project to determine if the project exceeds or falls short of budget.
Real-World Example of FF&E Accounting Treatment
Accountants spread out the cost of acquisition associated with FF&E things over time, slowly decreasing their value over the course of their lifespans. However, to do this, accountants need to properly establish the value that each product has according to IRS guidelines.
While FF&E products typically have a useful life of 1 year or more however, the duration of their useful lives can vary in a significant way in the same item from one to the next. For instance, while desktop computers are considered to be outdated in three years, as per the IRS the computer has five useful years. In contrast it is the case that the IRS gives office furniture an effective life span that is seven years.
Real-World Example of FF&E Depreciation
Let’s suppose that the value of a new vehicle has a value of $10,000, and that it has a lifespan of five years in accordance with the IRS. 2 Let’s also consider that the vehicle’s maximal salvage value will be around 20 percent. When a business purchases the vehicle, it tracks the depreciation expense each month in the following manner:
The depreciation fee amounts to $133.33 at the beginning of the month. It is the total amount of book value of the vehicle is the difference between the initial book value and depreciation accumulated over the course of its life.