depreciation schedule of computer equipment - summary
- From: "DR. DOUGLAS A. SMITH, UNIVERSITY OF TOLEDO" <DSMITH ^at^
uoft02.utoledo.edu>
- Subject: depreciation schedule of computer equipment - summary
- Date: Fri, 22 Apr 1994 15:29:15 -0500 (EST)
My original posting:
Can anyone tell me if there is a generally accepted (i.e. by CPAs)
depreciation schedule for computer workstations? Is there a general rule
of thumb which can be used?
In particular, I am curious about Apollo DN4500 workstations (which ran
using the Motorola 68030 chip). If these were obtained in early 1989, what
would be their worth 3,4, and 5 years later (assuming they were in good,
working condition)? How does one calculate worth if certain components
were inoperable and not repairable?
Doug
Douglas A. Smith
Assistant Professor, Department of Chemistry
Center for Drug Design and Development
and
Chairman-elect, ACS Division of Computers in Chemistry
The University of Toledo
Toledo, OH 43606-3390
voice 419-537-2116
fax 419-537-4033
email dsmith ^at^ uoft02.utoledo.edu
ANSWERS:
From: IN%"arne ^at^ hodgkin.mbi.ucla.edu" "'Arne Elofsson (arne
^at^ hodgkin.mbi.ucla.edu)'" 6-APR-1994 14:10:53.99
To: IN%"DSMITH ^at^ uoft02.utoledo.edu" "DR. DOUGLAS A. SMITH,
UNIVERSITY OF TOLEDO"
CC: IN%"arne ^at^ hodgkin.mbi.ucla.edu"
Subj: RE: CCL:depreciation of workstations
Worth $0.0 (excluding screens)
A 68030 processor is slower than a 486 running linux
which can be bought (with scren disk etc) for less than
$1000.
arne
From: IN%"larson ^at^ caesar.iaf.uiowa.edu" "David Larson"
6-APR-1994 14:12:57.82
To: IN%"DSMITH ^at^ uoft02.utoledo.edu" "DR. DOUGLAS A. SMITH,
UNIVERSITY OF TOLEDO"
CC:
Subj: RE: CCL:depreciation of workstations
This would be useful information to have. Would you please post a summary to
the group?
Thanks in advance,
Dave Larson
-------------------------------------------------------------------------------
Dave Larson | Image Analysis Facility, 70 EMRB
University of Iowa | Iowa City, IA 52242
larson ^at^ caesar.iaf.uiowa.edu | (319) 335-7900
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From: IN%"nagle ^at^ tammy.harvard.edu" "Robert J. Nagle"
6-APR-1994 15:20:04.14
To: IN%"DSMITH ^at^ uoft02.utoledo.edu"
CC:
Subj: RE: CCL:depreciation of workstations
Hey, Doug
In the past, the financial guys I've worked with have depreciated
these over 5 years. The particular schedule used is actually
dependent on the nature of your business as well as how aggressive you
wanna try to be. Generally these would be done on half year,
declining balance method.
Remember in a relatively small business you can gain a lot by
expensing some of the your capital expenses (used to be a $10K limit
per annum, now it's much higher).
DSMITH> In particular, I am curious about Apollo DN4500 workstations (which
ran
DSMITH> using the Motorola 68030 chip). If these were obtained in early
1989, what
DSMITH> would be their worth 3,4, and 5 years later (assuming they were in
good,
DSMITH> working condition)? How does one calculate worth if certain
components
DSMITH> were inoperable and not repairable?
Value or depreciated value. Obviously you may be carrying something
at a certain book value but for practical purposes it's value may be
zero (or the converse). So is this a TAX question or a value
question? Finally items that become worthless can be sold
(everything can be sold) - you can then claim a loss if the value
received is less than the book value. Of course, you may get into
recapture situations (if you expensed some of the capital costs, or
changed the depreciation method).
RN
-------------------------------------------------------------------------------
Robert J. Nagle nagle ^at^ tammy.harvard.edu
Dept. of Chemistry, M/S 223, Harvard University (617) 495-0787
12 Oxford Street, Cambridge, MA 02138, USA
From: IN%"apisan ^at^ redvax1.dgsca.unam.mx" "Pisanty Baruch
Alejandro-FQ" 6-APR-1994 15:56:31.65
To: IN%"DSMITH ^at^ uoft02.utoledo.edu" "DR. DOUGLAS A. SMITH,
UNIVERSITY OF TOLEDO"
CC:
Subj: RE: CCL:depreciation of workstations
Dear Doug,
I don't know about US CPA's, but engineers as well as many other
professionals around here use 20% per year
for all other equipment and would tend to suggest the same thing for
computers. You simply are treating them as capital goods.
I don't have to do depreciation but in other planning and budgeting
issues the same lifetime of five years, and therefore the same annual
figure based on 20%, are used and I get good acceptance of such
statements, and the results I derive from them, from my administrative
surroundings.
In the case of inoperable equipment I think the picture is pretty bleak.
Even for operable but obsolete (or nearly so) computers you can't get
more than say 10% of the price if the original dealer agrees to buy it
back (please correct me if you have a better figure in the US market).
The best guidance one might have for the price of inoperable equipment in
principle is the machine's weight, since it will only be valued as scrap;
the most valuable parts seem to be the gold in the circuits, the metal
racks of larger machines,
and some value is attached to the silicon (there is not that much of it
inside a computer nowadays, plus its resale value is small as the
recycling is costly anyway).
We have been successful in getting something for our used inoperable
computers in a different scheme which should be generally applicable: we
get a discount in maintenance from our maintenance dealer if he gets
parts from us, ie, some units at this university in a way provide for
cannibalization of their useless computers through an external dealer
(and not, or not only, internally) with a cost benefit.
Of course, this is a bit different in the States, since you have a
stronger resale and rebuild market than we do.
I would be interested in knowing the response to your inquiry.
Yours,
Alejandro
****************************************************************************
Dr. Alejandro Pisanty, Secretary of the Advisory Council on Computing, UNAM,
and Head of the Graduate Division, Faculty of Chemistry, UNAM
Universidad Nacional Autonoma de Mexico (UNAM)
Ciudad Universitaria
04510 Mexico DF
MEXICO
Tel. (+52-5) 622 4181, 616 1649; Fax 550 0904, 616 2010
****************************************************************************
From: IN%"burkhart ^at^ goodyear.com" 6-APR-1994 16:03:44.03
To: IN%"DSMITH ^at^ uoft02.utoledo.edu" "DR. DOUGLAS A. SMITH,
UNIVERSITY OF TOLEDO"
CC:
Subj: RE: CCL:depreciation of workstations
Doug!
You must be joking!!!!!
A 5 year-old workstation is not worth the plastic it was packaged in!
The only thing of value may be the display console. The video tube is
still worth something...otherwise, the system has no worth.
If you want some harder facts than this, I would talk to a leasing
agent (viz., Citicorp). I would suspect, though, that the usable
lifetime of a workstation is about 3 years.
--------------------------------------------------------------------------
Craig W. Burkhart, Ph.D. Senior Research Chemist
E-mail: cburkhart ^at^ goodyear.com The Goodyear Tire & Rubber
Co.
Fone: 216.796.3163 Research Center
Fax: 216.796.3304 142 Goodyear Boulevard
Akron, OH 44305
--------------------------------------------------------------------------
For a successful technology, reality must take precedence over
public relations, for Nature cannot be fooled - Feynman
--------------------------------------------------------------------------
From: IN%"gmeier ^at^ ncsa.uiuc.edu" 6-APR-1994 16:08:58.53
To: IN%"DSMITH ^at^ uoft02.utoledo.edu"
CC:
Subj: RE: CCL:depreciation of workstations
Doug,
I know that the IRS requires that a 5 year schedule be used for
depreciating any computer equipment for home or small business use. I
suspect that 5 year depreciation must also be used (for tax purposes) for
larger systems in an academic or corporate environment, but I don't know
that for a fact. I'm not certain about the procedure for equipment that is
no longer operable.
Hope this helps.
Gary
Gary Meier, Ph.D. (gmeier ^at^ ncsa.uiuc.edu)
FMC Corporation,
Agricultural Chemical Group
Box 8
Princeton, NJ 08543 (609) 951-3448
From: IN%"Jie.Yuan ^at^ UC.Edu"
"JieYuan,Chemistry,U.Cincinnati" 6-APR-1994 16:46:05.85
To: IN%"DSMITH ^at^ uoft02.utoledo.edu"
CC:
Subj: RE: CCL:depreciation of workstations
Hi!
It is well discussed in the FAQ sheets from the newsgroups
comp.sys.sgi.xxx. Although they discuss mainly SGI machines, the
methods should apply to any computer hardware. These FAQ sheets
are posted periodically. You can also obtain them by anon. ftp to
a few sites. Here is one of them:
rtfm.mit.edu:/pub/usenet/comp.sys.sgi.misc/
I am not good at writing, but I'll give it a try here.
Ignore me if you don't like it.
You should first know 2 facts: (1) the old machine's
performance specs, and (2) the new machines specs and prices.
Then, you proportionate the new machines value by its spec
vs. the new machines spec. to come up with an estimate of the
old machine's value as it were new, today. And considering the
wear and tear of the old machine, you decrease the estimate by
a factor to conclude your appraisal of the old machine.
For example, we bought an used SGI P.I. 4D35GT, which has
a clock speed of 36MHz. The Indigo^2, 150MHz with Extreme Graphics
is worth $30k. The estimate of the PI as it were new is about
$30k/7 = $4.5k. But the PI comes with 56Mb RAM, and the Indigo^2
with only 32Mb RAM. The PI also has Genlock and stereo viewer.
After all the deductions and additions, we settled for $5k, which
I think is a fair deal.
Cheers!
Jie
===== Jie Yuan === Chemistry === U. Cincinnati === Jie.Yuan ^at^ UC.EDU =====
From: IN%"gerson ^at^ VNET.IBM.COM" 6-APR-1994 16:59:25.61
To: IN%"dsmith ^at^ uoft02.utoledo.edu"
CC:
Subj: NO SUBJECT
From: Dennis J. Gerson, Ph.D.
Technical Market Support; Chemical Sciences
---------------------------------------------------
Subject: NO SUBJECT
Doug, according to the spouse....
If the initial cost was over 20K$-list then it is capital equipment, so
5 year depreciation is defined as the year# divided by the sum of the
years digits (or 5+4+...) times the initial cost
For year 1 [1/(5+4+3+2+1)] * purchase price = depreciation
If the equipment was lease/purchase, then see a CPA because the lease
clauses determine the depreciation schedule.
Regards, Dennis
---------------------------------------------------------------
IBM POWER Parallel Systems Division |Tele:(214)406-7267 Fax:7246
1503 LBJ Freeway MS/280750 |IBMLINK: USIB5MSK ^at^ IBMMAIL
Dallas TX 75234 USA |Email: gerson ^at^ vnet.ibm.com
*** Forwarding note from SMTP2 --IINUS1 04/06/94 13:26 ***
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From: IN%"jmiller ^at^ SANDCASTLE.COSC.BROCKU.CA" 6-APR-1994
17:01:46.13
To: IN%"DSMITH ^at^ uoft02.utoledo.edu" "DR. DOUGLAS A. SMITH,
UNIVERSITY OF TOLEDO"
CC:
Subj: RE: CCL:depreciation of workstations
There is no acceptable formula since compters are obsoleted so quickly --
best thing is to check prices on used market -- my guess is that these
systems are going for under $1,000. since you can get 68030 based computer
power today for under $1,000. Probably worth $500. for spares or for
themonitors if they are still good. As a UNIX box they are valueless.
Jack Martin Miller
Professor of Chemistry
Adjunct Professor of Computer Science
Brock University,
St. Catharines, Ontario, Canada, L2S 3A1.
Phone (905) 688 5550, ext 3402
FAX (905) 682 9020
e-mail jmiller ^at^ sandcastle.cosc.brocku.ca
From: IN%"jmiller ^at^ SANDCASTLE.COSC.BROCKU.CA" 6-APR-1994
17:08:17.11
To: IN%"DSMITH ^at^ uoft02.utoledo.edu" "DR. DOUGLAS A. SMITH,
UNIVERSITY OF TOLEDO"
CC:
Subj: RE: CCL:depreciation of workstations
P.S. to my earlier message
I sold some Sun 3/60s - comparible systmes of similar age two years ago and
got barely $1,000. then.
Jack Martin Miller
Professor of Chemistry
Adjunct Professor of Computer Science
Brock University,
St. Catharines, Ontario, Canada, L2S 3A1.
Phone (905) 688 5550, ext 3402
FAX (905) 682 9020
e-mail jmiller ^at^ sandcastle.cosc.brocku.ca
From: IN%"balbes ^at^ osiris.rti.org" 6-APR-1994 19:31:44.70
To: IN%"dsmith ^at^ uoft02.utoledo.edu"
CC:
Subj: depreciation
I beleive the official IRS rule is to depreciate computers
over 3 years, unless you can conclusively prove they
have a significalificantly different lifetime.
I can get the refererence for you, if you need it.
Lisa
% This came directly from a computer and is not to be doubted or disbelieved. %
Lisa Balbes
Osiris Consultants Scientific Software/Technical Writing
2229B Hedgerow Rd balbes ^at^ osiris.rti.org
Columbus, OH 43220 614-442-9850 FAX: 614-451-5860
From: IN%"balbes ^at^ osiris.rti.org" 6-APR-1994 23:03:50.86
To: IN%"DSMITH ^at^ uoft02.utoledo.edu" "DR. DOUGLAS A. SMITH,
UNIVERSITY OF TOLEDO"
CC:
Subj: RE: depreciation
Of course, I can't find it in the book I have here, and
I gave the other one away (this being tax time and all).
I talked to my friend upstairs, who is an accountant, and
he says the thinks it's 3 years also, but he couldn't
find it on paper either. Call the IRS tomorrow -
have something to read handy, you're liable to wait awhile.
number is 1-800-829-1040. Good Luck.
Lisa
% This came directly from a computer and is not to be doubted or disbelieved. %
Lisa Balbes
Osiris Consultants Scientific Software/Technical Writing
2229B Hedgerow Rd balbes ^at^ osiris.rti.org
Columbus, OH 43220 614-442-9850 FAX: 614-451-5860
From: IN%"Patrick.Bultinck ^at^ rug.ac.be" "Patrick
Bultinck" 7-APR-1994 07:42:47.29
To: IN%"DSMITH ^at^ uoft02.utoledo.edu" "DR. DOUGLAS A. SMITH,
UNIVERSITY OF TOLEDO"
CC:
Subj: RE: CCL:depreciation of workstations
If there would be a simple rule, could you please let me know...
Patrick, University of Ghent
From: IN%"ccl ^at^ ccl.net" "Computational Chemistry"
7-APR-1994 10:06:14.61
To: IN%"dsmith ^at^ uoft02.utoledo.edu"
CC:
Subj: RE: CCL:depreciation of workstations
The IRS uses 5 years, straight line depreciation. This is followed by
a large part of industry. Unfortunately tax exempt institutions, such
as Universities, cannot take advantage of this cost sharing by US.
From: IN%"marshall ^at^ mcs.anl.gov" "Chris Marshall"
7-APR-1994 11:05:07.41
To: IN%"dsmith ^at^ uoft02.utoledo.edu"
CC:
Subj: Depreciation
Dr. Smith:
Most accounting procedures on computer hardware takes a straight
line 5 year depreciation; ie. 20% per year with essentially no
resale value after 5 years.
Chris
**********************************************************************
* __________________________________________________________________ *
*| |*
*| Christopher L. Marshall |*
*| Research Scientist, Coal Chemistry Group |*
*| |*
*| Argonne National Laboratory Phone: (708) 252-4310 |*
*| Building 200; Room L-121 FAX: (708) 252-9288 |*
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From: IN%"apisan ^at^ redvax1.dgsca.unam.mx" "Pisanty Baruch
Alejandro-FQ" 7-APR-1994 13:21:07.25
To: IN%"DSMITH ^at^ uoft02.utoledo.edu" "DR. DOUGLAS A. SMITH,
UNIVERSITY OF TOLEDO"
CC:
Subj: RE: Further comment on depreciation.
Dear Douglas,
a PS to my letter yesterday:
also with older equipment the question of how to value it has to be
coupled to what it costs to just own it. If what you pay for maintenance
and support in one year will buy a replacement machine, it just ceases to
be reasonable to keep the machine - as long as you can transfer the money
from one pocket to other, which sometimes is hard for accountants to
swallow. Comments?
Yours,
Alejandro
****************************************************************************
Dr. Alejandro Pisanty, Secretary of the Advisory Council on Computing, UNAM,
and Head of the Graduate Division, Faculty of Chemistry, UNAM
Universidad Nacional Autonoma de Mexico (UNAM)
Ciudad Universitaria
04510 Mexico DF
MEXICO
Tel. (+52-5) 622 4181, 616 1649; Fax 550 0904, 616 2010
****************************************************************************
From: IN%"bowlus ^at^ palres.dnet.sandoz.com" 7-APR-1994 18:50:22.80
To: IN%"'dsmith ^at^ uoft02.utoledo.edu' ^at^ SNDZEH.dnet.sandoz.com"
CC: IN%"BOWLUS ^at^ sandoz.com"
Subj: Depreciation
There are fairly standard depreciation schedules for different types of
equipment which are accepted (perhaps mandated by) the IRS. Presumably
these conform to GAAP (Generally Accepted Accounting Principles), which is
your auditors' (=CPAs) Bible. Don't quote me, but this ranges from 3 to 5
years for some computing equipment. We generally use 5 years for
"small"
systems (I don't worry about the larger business systems), which causes us
no small heartburn, since the machines are obsolete by two generations before
they are fully depreciated (i.e. can be replaced without having to charge
residual "value" to one's budget or earnings).
There are several ways of calculating depreciation, of which the simplest
is "straight-line". For a 5-year lifetime, the equipment loses 20% of
its
initial value per year. Thus equipment purchased in 1989 is essentially
valueless sometime this year. Not fully depreciated, but irreparably
broken stuff I won't comment on. . .you need an accountant.
In any event, your business office should be able to tell you how to
account for depreciation, or you could even (gasp!) ask the IRS for this
type of information.
Please don't confuse the accountants' "depreciated value" with any
residual
market value. Even with a realistic 3 year depreciation, a partly
depreciated workstation is carried on the books at more than its market
value; conversely, a fully depreciated piece of equipment may have some
residual value.
Regards,
sb
===========================================================================
Stephen B. Bowlus, Ph.D. Computer-Aided Molecular Design
Research Division
e-mail: bowlus ^at^ sandoz.com Sandoz Agro, Inc.
Phone: + 1 415 354 3904 975 California Ave.
Fax: + 1 415 857 1125 Palo Alto, CA 94304
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