Jump to content
ADI Forums
Spitfire

Accounting & Distillery Equipment Depreciation

Recommended Posts

Spitfire    1

Hello everyone,

I'm trying to determine what could be a reasonable accounting method to compute equipment depreciation and life expectancy when it comes to a distillery.

My accountant tells me that general equipment is usually treated using a declining balance method where 20% of the remaining cost is shaved each year from earnings. A linear method could also be used. But then he asked me, what is life expectancy of distillery equipment? Unlike a desktop computer which is worth next to nothing after 5 years, a pot still has a long life. Stainless steel tanks are still worth something after 50 years. Some other equipment has shorter life expectancy. That being said, all this equipment must be treated as a whole from an accounting perspective.

This may not sound sexy, but depreciation method and equipment life expectancy can have a significant impact on financial projection, so I'm curious to hear what methods and parameters distillery owners are using.

Thanks.

Chris

Share this post


Link to post
Share on other sites

Spitfire,

Although I do not know the answer to your question I have worked extensively with a gentlemen that probably could answer your question. Jack Irvine at Irvine & CO is not only a CPA, he is a CPA that specializes in nothing but distilleries and wineries and he is incredibly skilled in these areas and I am sure he could assist in answering your questions should you wish to reach out to him. He can be contacted at 503-252-8449 or via email at jack@irvinecpas.com. Tell him I pointed you in his direction, we do a lot of work together. Best of luck on this and I am sure we would all be interested in hearing of the results.

Share this post


Link to post
Share on other sites
Spitfire    1

Aaron,

Thank for the tip, I contacted them and they replied quickly. Here's the essence of what they told me:

- When equipment is depreciated using a declining balance method this tends to not reflect the economic reality.

- For stainless type equipment, like stills, a life between 20 and 30 years is selected and it is depreciated straight line. While the stainless itself is still existing at 20-30 years, the equipment could be obsolete so 20-30 years is about the right life, generally.

- For the other equipment, we will often pick a 5-10 year life for each asset depending on what’s reasonable.
This makes a lot of sense to me.
Chris

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×