Personal Property Tax Services: Capital Asset Review & Evaluation
Joseph A. Gagliano Principal
Marshall & Stevens, Inc. Our teams are comprised of seasoned valuation, banking and legal professionals - experts who speak the language of your industry or practice; who grasp its nature, subtleties and dynamics; and who understand your unique concerns. We take great pride in our people, our independence and our ability to remain on the cutting edge of issues affecting our clients.
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Quality Decision making Independence & Integrity
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LOS ANGELES • NEW YORK •
CHICAGO • PHILADELPHIA • ST LOUIS • TAMPA
Quality Valuation Valuation Advisory
Capital Asset Valuation
• Business Valuation
• FDIC failed bank F,F&E
• Goodwill & Intangible Asset Impairment • Fair Value Analysis
• Machinery & Equipment • Ghosts Assets
• Purchase Price Allocation • ESOP • Equity, Stock, Option and Debt Valuations
• Structured Finance • Insurance • Inventory and personal Property Register
Real Estate Valuation
• Real Estate Valuations & Consulting
• Mergers & Acquisitions
• Property Tax Consulting • Collateralized Loan Valuations • PPA for Real Estate Allocation
• Fairness & Solvency Advice • Buy-Side, Sell-Side Consulting • Private Debt & Equity Placement • Purchase Price Allocations and Fresh Start Accounting
• Chapter 11 Restructurings • Solvency Analyses
• Expert Witness • Dispute Analysis
• Business Valuation • Tax Restructuring
• Fresh Start Accounting • 363 Marketplace Services
• Infringement Damages • Insurance Claims
• Property Tax • Estate & Gift Tax
• Fraudulent Transfers & Preference Analyses • Expert Testimony
• Contract Disputes
• Intellectual Property Valuation • Discount Studies
• Bankruptcy Litigation
Quality Decision making
Independence & Integrity Without conflicts of interest, Marshall & Stevens is an appropriate choice in providing the important work that must pass the scrutiny of the IRS, SEC, shareholders, and other stakeholders Providing valuation services without contingencies like an investment banker or property tax consultant, we avoid biases. We understand that “this is the way we’ve always done it” is rarely the right answer to a complex question. We have a stringent quality control process, overseen by our Board of Directors, all of whom are significant shareholders in our company
Marshall & Stevens’ valuation leaders are qualified at the highest level of their profession Financial Al King, Vice Chairman, CMA • Financial Accounting Standards expert Chris Louis, ASA, MAI • Certified specialist in Finance and Real Estate John Ryan, ASA John Spude, ASA A. Kendall Raine III, MBA, Series 7
Real Estate Lance Biernbaum, MAI, CCIM
Equipment Carl Bloomquist, ASA David Koller, ASA Robert Owens, ASA Shane Park, ASA
The Marshall & Stevens’ team includes professionals trained and experienced in: Law Accounting and audit practice Real estate development, management and finance
Investment banking Commercial banking
We have established strategic relations with a wide range of specialist firms to provide advice, as part of the M&S team, on areas where we may lack specific in-house expertise 6
Fixed Assets Ghost Assets are assets that no longer physically exist within an organization yet remain on the books. These assets can negatively impact: • Insurance premiums • Personal property tax basis • Depreciation schedules and earnings
Fixed assets are a significant portion of most companies’ Balance Sheet. Companies retire assets, purchase replacements and perform repairs on an ongoing basis. Over time, book and tax values reported for a plant or facility may not truly reflect the assets at a location. A detailed fixed asset study will determine that a percentage of the assets, studies have shown 10-15%, on the books are no longer are in use, cannot be located, or are being cannibalized for parts.
Asset Control Issues Failure to manage fixed assets results in: Inability of management to adhere to the SEC’s definition of internal controls over financial reporting • Potential for a “Significant Deficiencies” or “Material Weakness”
Inaccurate financial reporting Inefficient use of capital resources Excess property tax liability Potential overpayment of insurance premiums Inability to manage corporate risk Wasting of corporate assets 8
Corporate Considerations All companies – public, private, non-profit - are affected by Ghost Assets. Any company adhering to or basing financial reporting standards on Sarbanes-Oxley must ensure that all assets are accounted for and reported in an accurate manner. Public companies by SEC rule must account for all assets. Private companies acquired in transaction with another company will need to account for all assets. Non-profit organizations are being required in many states to provide more accurate financials with greater transparency.
Corporate Concerns When was the last time the physical assets were verified against the corporate fixed asset record? What were the results? How have business combinations been booked? Are the depreciable and amortizable lives reasonable for the asset costs being written off? Has the company now or at any time in the past exercised practices that would cause the fixed asset record to incorrectly represent the physical assets employed in the business? Any response that reveals inaccuracy in the asset records should be reviewed in a comprehensive manner in order to be corrected.
Marshall & Stevens’ Capital Asset Review and Evaluation Services The Capital Asset Review and Evaluation Services (CARES) solution is a service provided by Marshall & Stevens to assist companies with optimizing and enhancing asset management and fixed asset records.
Supports management’s statements of establishing and maintaining adequate internal control over financial reporting
Accurate property tax reporting
Provides accurate fixed asset data
Identifies non-existent assets, optimizes return-on-asset ratios
Reduces the need for property management workforce 11
Marshall & Stevens’ Capital Asset Review and Evaluation Services Capital Asset Review and Evaluation Services Methodology
Assesses the property records and the asset life cycle
Develops the appropriate plan after assessment
Performs a complete physical inventory capturing all pertinent asset data
Reconciles, cleanses, and records assets
Delivers a validated, supportable, updated and enhanced asset information with a go forward asset management plan
Optimized Fixed Asset Records
Optimal Unit of Reporting: only track what is required from regulatory agencies, including local property taxation, insurance, or environmental control management.
Optimal Unit of Property Management: use Best Practices to define most efficient unit of property for managing asset life cycles.
Address Special Information Needs: construction in progress, leased property, environmental assets, non-insurable assets, retired assets, and adjusted property
Asset Information System: include asset type, description, manufacturer, serial number, year, original cost, account, project number, and as appropriate location and bar codes, job number, partial retirement, transfer, and adjustment information
Classification by Reporting Class
Identification of Intangibles 13
Internal Control of Fixed Assets Valuation Issues for PP&E
Insurable Values – Cost of Reproduction
Property tax values – Fair Market Value
Surplus equipment available for transfer or sale • Orderly Liquidation
Internal Control of Fixed Assets (cont.)
Insurable Values • Need to know how much insurance to carry • Proof of loss • Determination of FV for Insurance is based on current Cost of Replacement New Less Depreciation (“CRNLD)
• Can inspect major items and apply cost indexes to remaining items
Internal Control of Fixed Assets (cont.)
Surplus and Idle Equipment • Many companies have assets no longer in use • • •
Space Insurance Taxes
• If properly identified, can develop sales amounts that could be realized • Alternatively, take impairment charge
Accounting for PP&E - Property, Plant & Equipment The Public Company Accounting Oversight Board (PCAOB) has established that internal controls of PP&E must be considered by management and reviewed by the auditor. Factors an auditor must consider to determine if an account is significant:
Size and composition of the account
Susceptibility of loss due to errors or fraud
Accounting and reporting complexities associated with the account
Exposure to losses represented by the account
Case Example 5 Casinos in 4 cities
Inventory and asset clean management for SOX 404(b) and stewardship.
Property Tax savings were significant.
Marshall & Stevens identified the value of the slots and separated the cost between software (non-taxable) and hardware (taxable).
Several hundred slots were identified as missing, or present but not on the books.
Renovations were reviewed and booked to reduce tax exposures.
Why choose Marshall & Stevens? We are a recognized leader in the valuation field and our experience is unsurpassed. The independence of our valuations benefits you for the property tax appeal process. We view this opportunity as a basis for a long-term relationship.
Contact Information Marshall & Stevens Corporate Headquarters 355 South Grand Avenue, Suite 1750 Los Angeles, California 90071
Joseph A. Gagliano 213.233.1514 Direct email@example.com