Ghost assets are those assets that reside on your company's
books even though they should have been retired due to consumption,
damage, theft or any other reason that would make them unusable.
It's estimated that, on average, 12% of a company's assets
are ghost assets. How could that be?
Well, think about it. When someone
replaces their older technology computer with a newer one, what happens?
The intent might be to reallocate the old computer to another employee
or for another purpose in the company. In many cases though, it's placed
in a storage room, never to be utilized again. At some point, it's finally tossed in the trash, usually with no bookkeeping transaction.
Furniture, copiers and other office equipment, along with any repairs
that have been made to these items, are all common ghost assets. But
why should we care?
First, not removing these assets from your books potentially leaves
you with a higher federal and state tax liability. In addition, if
your state assesses a personal property tax based
on the value of your assets,
you may find you are paying taxes on assets that are no longer
in service. Finally, if your insurance premiums are based on your
fixed asset valuation, you may find yourself insuring assets that no
longer exist or are of no actual value to your company.
Interestingly, even
moving assets between locations can have a financial affect if the
locations are in different states. Since the calculation of personal
property taxes vary from state to state, you could potentially have
increased or decreased your liability with the movement of the asset.
If left on the books, ghost assets can haunt your company year after
year. Now is a good time to identify and remove these items by reviewing
asset lists, accounting records and tax returns. The savings you enjoy
will most likely exceed the cost and effort of performing the review.
The chart below shows an example of the savings you may find with just
a limited number of assets:
| Assumptions | |
|
Total Cost of Depreciable Fixed Assets: |
$200,000 |
|
Total Cost of Ghost Assets (@12%): |
$24,000 |
| Tax Rate - Federal & State: | 0.36 |
| Calculations: | |
|
Potential Federal & State Overpayment |
$3,476 |
|
Potential Personal Property Tax Overpayment |
$571 |
|
Potential Insurance Overpayment |
$240 |
| Potential First Year Savings |
$4,267 |
If you aren't doing so already, you may want to consider implementing
a Fixed Asset Management program that can automatically track your
assets from acquisition to disposal and prevent the ghosts from coming
back.
