Business personal property
Business personal property they are assets of the enterprise. They are included in assets - excluding, inter alia, long-term receivables, prepayments and accruals or other intangible assets. Business personal property should include values such as office supplies, computers, heavy equipment, machinery. Determining the value of a business personal property allows potential investors to determine the market price of a company. In addition, the valuation of these assets helps insurance companies to determine the insurance premiums of a company against accidents. It is worth mentioning that the acquisition of business personal property is a tax deductible cost, so it can be effectively used to increase the tax shield of the company.
Tangible and Intangible business personal property
Business personal property is divided into two types: tangible and intangible. The basic values of the company are material values. These include, inter alia, equipment or other movable property which may be used for business purposes. Intangible business personal prophet includes research and development, software, artistic originals, brand equity and organizational capital [1]. In addition, intangible assets include licenses, trademarks and customer relationships (in accordance with International Accounting Standards). Nevertheless, they are difficult to value and very often the financial statements are questioned by the misrepresentation of the intangible assets held in the books. The most frequently used method for their valuation is the market value equation framework [2].
Business personal property from tax perspective
Possession of some business personal property components means that the company is able to increase its tax shield. However, not all values will increase it. A tax shield as a method of reducing the tax base is increased only when borrowing costs are included as tax deductible costs. These are, among other things, values such as:
- Leasing a car
- Loans and credit granted by financial institutions or private entities
- Depreciation write-offs
It is worth noting that the tax regulations of the countries may differ. Therefore, not all activities related to the acquisition and use of tangible or intangible business personal property will be associated with an increase in the tax shield. The rules may provide for certain exclusions which will prevent businesses from deducting tax deductible expenses. These are e. g. interest on loans granted by related parties or high interest on leasing contracted for the sole purpose of reducing the tax base.
Managing business personal property
The management of business personal property is important to know the true value of a company. Therefore, very often businesses introduce a record of fixed assets, which allows them to efficiently manage costs in the form of depreciation write-offs, but also provides valuable information about the assets of the company. In addition, experts who are able to assess tangible and intangible business personal property are employed on an ongoing basis [3].
Footnotes
| Business personal property — recommended articles |
| Depreciation vs. amortization — Asset based approach — Working interests — Amortization of intangible assets — Non-operating expense — Physical asset — Sundry income — Residual payment — Total capital |
References
- Brynjolfsson, E., Saunders A., Turlea G. (2016)Information Technology Related Intangible Assets MIS Quarterly Vol. 40 No. 1
- Buscemi, A., Hagos Yallwe A., (2014) An Era of Intangible Assets , Journal of Applied Finance & Banking, vol. 4, no. 5
- McGrattan E. R., Prescott, E. C., (2014) A Reassessment of Real Business Cycle Theory Federal Reserve Bank of Minneapolis Research Department Staff Report 494
Author: Melania Mazur
