Furniture, Fixtures, and Equipment (FF&E)

Furniture, Fixtures, and Equipment (FF&E) are the movable, tangible assets a business uses in its daily operations but that are not permanently attached to a building. Examples include desks, chairs, computers, phones, display cases, and many types of security equipment. Properly identifying, accounting for, and depreciating FF&E is essential for budgeting, financial reporting, and valuation.

Key points

• FF&E are tangible, movable assets used in normal business operations.
• They are recorded as separate line items on financial statements and included in project and capital budgets.
• FF&E costs are capitalized and depreciated over each asset’s useful life rather than expensed entirely when purchased.
• Typical IRS useful lives (for depreciation purposes) include five years for computers and seven years for office furniture, though actual useful life depends on the asset and tax rules.

Role in operations and valuation

• FF&E enable daily business functions (e.g., a receptionist’s desk, chair, phone, and computer).
• They affect cash flow planning and capital budgets because purchases are capital expenditures.
• In valuation and liquidation scenarios, FF&E contribute to the company’s tangible asset base and recoverable value.

Accounting and depreciation

Businesses capitalize FF&E and then allocate the cost over the asset’s useful life using depreciation. The choice of depreciation method (straight-line, accelerated methods, tax-specific systems) affects reported profit and tax liabilities.

Common considerations:
* Determine the asset’s useful life (often guided by tax authorities or internal policy).
* Estimate salvage value (the expected residual value at the end of useful life).
* Apply the chosen depreciation method to spread cost across periods.

Example (straight-line depreciation):
* Purchase price: $10,000
Useful life: 5 years
Salvage value: 20% of purchase = $2,000
Depreciable base = $10,000 − $2,000 = $8,000
Annual depreciation = $8,000 / 5 = $1,600
Monthly depreciation ≈ $133.33
Net book value after one month = $10,000 − $133.33 = $9,866.67

Tax authorities may prescribe different lives or methods for tax reporting than those used for financial reporting; companies should follow applicable tax rules and accounting standards.

Practical considerations

• Security equipment (e.g., portable X-ray scanners) can be FF&E if not permanently installed.
• Set capitalization thresholds to decide which purchases are capitalized versus expensed.
• Track inventory, maintenance, and disposals to keep records accurate and support valuations.
• Review useful-life estimates periodically—technology and wear can shorten useful lives, while refurbishing or maintenance can extend them.

Bottom line

FF&E are essential movable assets that support everyday business operations and materially affect financial statements, budgets, and valuations. Proper classification, capitalization, and depreciation—guided by accounting policy and tax rules—ensure accurate financial reporting and informed decision-making about purchases, maintenance, and replacement.