Comments on: How Should We Amortize Plant Costs?

By: Marion Gropen

Marion Gropen — Mon, 22 Mar 2010 17:15:06 +0000

Glad you liked it. In most cases, you can make a case that you’re representing reality as closely as possible, when you do have to challenge a standard accounting rule of thumb.

By: J. Eddy

J. Eddy — Mon, 22 Mar 2010 17:08:35 +0000

It does, thanks… Metrics suggest that sales on most of our titles peter out to the background level after two or three years or so, barring any new releases that spur backlist sales pulses. So, three years was what I was already contemplating as a common-sense number for us.

Thanks again for the input. Very helpful!

By: Marion Gropen

Marion Gropen — Fri, 19 Mar 2010 18:18:16 +0000

I don’t believe that there’s a best practice set for either tax or financial accounting. But I do think that you might want to use something like the depreciation structure for a durable fixed asset.

Personally, I’ve always used straight line depreciation, with a life of one year for normal front list trade non-fiction, and three years for an evergreen backlist title. That seems to be a good compromise.

You could, I think, use MACRS instead of straight line, but I see no real reason to go to the extra effort. It might give you a gain in the first year or two that you use it, but after that, you’re in a steady state, and there’s no gain for the extra labor cost to do the calculations.

Hope that helps.

By: Marion Gropen

Marion Gropen — Wed, 03 Mar 2010 13:01:27 +0000

I’m in Grenada this week, but check back next week and we’ll talk.

By: J. Eddy

J. Eddy — Tue, 02 Mar 2010 20:33:50 +0000

I just recently found this blog and have forwarded the link on to others. Lots of great info here. Thanks for your time and effort.

We’ve been niche publishing for 10 years, though most of that time very small and operating as a Sole Prop, during which time we accounted for the Plant costs in precisely the WRONG way. This year we have incorporated and are trying to bring everything to the next level and do it all RIGHT (or as close as possible anyhow).

Since we can keep our titles “in stock” (potentially) perpetually thanks to short-run and POD printing (and via direct sales to the niche), what is a reasonable length of time to amortize the Plant costs? Has anyone determined a Best Practices length of time to account for the impacts these emerging technologies have on the business?

By: Marion Gropen

Marion Gropen — Tue, 05 Aug 2008 15:42:53 +0000

Accounting principles were created by accountants over centuries, but are codified by the Financial Accounting Standards Board (in the US — there are other orgs in other countries). FASB regs are then used as the basis of many rulings by the SEC and the IRS. So, no, you don’t go to jail if you don’t follow the FASB regs, but you may ALSO be violating laws relating to securities (if you have company debt or have sold stock), or in filing your taxes based upon your accounting records.

And, of course, you’re probably doing yourself harm, because those regs are there for a reason, and those reasons apply to most businesses.

By: Accounting Police: Do They Exist?

Accounting Police: Do They Exist? — Sun, 24 Feb 2008 22:45:09 +0000

Who created accounting principles? Who sets and revises accounting standards? What if you don’t follow all the rules, do you go to jail? Is there an accounting police force that investigates and arrests violators? It would seem that there must be some regulatory force to make sure that providers of financial statements conform to the rules.