FIXED ASSETS TAX BOOKS ANALYSIS
ERP vs. Red Moon Solutions’ Fixed Assets Manager
Red Moon Solutions solves asset depreciation problems for professional accounts. It is
all we do, we take it seriously, and do it right.
Why is choosing an asset depreciation calculation tool so deceptively simple? Politics is
the principal reason. Book depreciation has one straight forward set of rules defined by
FASB that remain relatively constant over time. Tax depreciation, on the other hand, is
the product of annual tinkering by the U. S. Congress and fifty state legislatures. That is
why our product needs to ship with pre-defined calculation rules for 438 different asset
Corporate tax departments call us surprisingly often and begin the conversation with “My
ERP system can not handle …..” Having either gotten the first set of reports from the
new system or discovered that no tax related reports exist; they call seeking solutions.
The following table illustrates the issue.
Item Accounting Needs Tax Needs
Tax Reports None 20+
Calculation Updates Rare Annual
Data Entry Simple/Automatic Complex
Data Validation None A Lot
Life to Date Calculations None Yes
AMT Calculations No Yes
Multiple Books No Yes
Tax Law Changes No IMMEDIATE
Corporations implementing new ERP systems often overlook the tax department issues
until late in the game, if at all.
To summarize Red Moon Solutions’ experience with companies who have implemented
an ERP Fixed Asset module for the tax department:
1. ERP Fixed Asset modules are built to support GAAP accounting not tax.
2. ERP Fixed Asset modules require customization to handle all tax depreciation
rules. Cost to implement, time to implement and accuracy are big concerns.
Tax rules change every year and maintenance is required to stay compliant. Further
work for IT professionals and customization consultants. . ERP Fixed Asset modules
are typically unable to meet tax reporting needs – which are significant. We estimate
that tax professionals use at least 20 specialized fixed asset reports to do their work.
Even then, tax departments often need the ability to export to Excel and do further
manipulation. With an ERP Fixed Asset module, extracts and custom reports will
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need to be built (cost, time and accuracy). Data entry validation is especially
important for tax. ERP Fixed Asset modules do not provide these rules. Even after
customizing calculations, asset classes and fields, ERP Fixed Asset modules remain
unable to offer tax data validation. Tax professionals face uncertainty and potential
reporting errors without the reliable data validation provided by Fixed Assets
Having worked with large companies in the area of fixed assets, it is our experience that
ERP/Financial applications, such as Oracle, PeopleSoft and SAP, are typically not
sufficient to meet the tax departments’ needs. Often tax departments are not included in
the ERP purchasing decision. We frequently speak with tax departments who were told
their ERP application would be able to handle tax depreciation. They only find out that
the ERP application won’t meet their needs when they receive their first set of reports
and can’t get the information they need. The tax department is then forced to shop for
and purchase specialty fixed asset software that meets their needs. The company wastes
a lot of time and money doing the process twice.
ERP systems were not designed to meet a tax department’s needs. Customization to
capture the specific tax rules related to depreciation will almost always be necessary.
Those special rules might include but are not limited to such things as:
• bonus depreciation
• Code Sec. 280F luxuary auto limitations
• requirements for other listed property
• mid-quarter test.
Additionally, those same financial systems were not designed to handle tax reporting
requirements. They often do not include reports that are necessary for a tax department
• Disposition Detail Report
• Bonus Depreciation Report
• Reconciliation Report
• 4562 Report
• Mid-Quarter Report
• Book Tax Comparison
You also have to consider the maintenance that will be required when a new tax law
change is passed. In order to get that change into an ERP, it will often require an IT
resource or outside consultant to code the new law, which means additional cost. It is
also important to think about who will be entering and maintaining your data. For
example, will a Financial/Accounting resource be indicating the tax class of the asset
when the asset is entered in the ERP Fixed Asset module? Financial/Accounting
resources typically aren’t familiar with tax classes. Will Finance and Tax both share the
same system, so information can be entered properly the first time? Finally, one of the
biggest things to consider in the ERP Fixed Asset module are the controls and validation
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that will be in place. Most ERPs do not have controls in place to make sure asset data is
entered correctly and don’t provide validation to make sure proper depreciation rules are
applied to assets based on IRS requirements.
Red Moon Solutions’ Fixed Assets Manager (FAM) is an application that was built
initially to support Arthur Andersen’s internal U.S. tax practice some 20 years ago. It
incorporates all of the tax rules provided by the IRS, including bonus depreciation, auto
limits, listed property and mid-quarter rules. Whenever a new tax law is passed or a new
asset class is provided by the IRS, Red Moon Solutions incorporates that change into the
software and ships the release out to customers. We accept responsibility for making
sure FAM is compliant with the IRS rules for depreciation. We also provide 40+
standard reports, including Additions Report, 4562 Report, Mid-Quarter Report, the
ability to create custom reports and the ability to export any report to a number of
different formats, including Excel. Finally, because FAM was built for Andersen, there
are a lot of controls and validation in place. When assets are entered or imported, FAM
validates the data and makes sure it is appropriate based on the IRS rules. For example,
an asset acquired in 1985 can not be coded to a MACRS method for depreciation. FAM
knows that asset should be using ACRS, because it was acquired prior to 1987. If you
were importing that information, you would receive a diagnostic indicating the asset had
not been imported for that reason. The controls provided by FAM ensure that your data
is compliant with IRS rules for depreciation.
Red Moon Solutions was formed in 2006 by Jim Shedivy, an Andersen partner who
headed up Andersen’s technology division. The majority of the people working at Red
Moon Solutions worked for Andersen at one time and have extensive tax and technology
experience focused primarily in the area of fixed assets. Red Moon Solutions continually
looks for new ways to add value to the tax department and our fixed asset clients. We
recently introduced a business intelligence tool that can be linked to our fixed asset data
for enhanced ad-hoc reporting and data analysis. It is pretty exciting! We would be
happy to set up a time to show you what we have to offer in this area.
We strongly believe that we can provide you the best solution for your fixed asset needs.
Below is a sample RFP that can be used when evaluating an ERP’s Fixed Assets module.
It includes our responses to the RFP as well.
Questions Issues/Posed Regarding
1. Can/How assets be entered just for tax purposes?
Fixed Assets Manager™ (FAM) Response: Your general ledger asset data
can be imported into FAM very easily at any desired interval (weekly,
monthly, quarterly, etc.). Asset data can be created in two ways. The first way
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is to create assets matching the data used (method, convention, life, etc) in
your current general ledger system. The second way is to create assets using
limited data from your system, (only the id, description, cost, date acquired,
and asset classification) and let FAM drop the correct tax rules for the asset
for Fed, ACE, Alt Min, and Accounting as needed. Many new clients initially
create two Fed books; one using our federally regulated tax rules and one
using the data coming out of their general ledger system. In this second
option, FAM has a tool to calculate what the correct amount of prior
depreciation should be, as often times the depreciation has not been correctly
calculated by the General Ledger system. Doing this allows users to run
comparison reports between the two. The tax department can then make
appropriate decisions on material issues they may have with incorrect past
Data can be imported into all books or just the tax book. FAM allows you to
create an unlimited number of user-defined books. Assets that don't exist in
your general ledger system can be either entered manually or imported from
an Excel spreadsheet into one or all books. If tighter integration is desired, the
FAM team will work with IT to specify and implement this integration.
Because FAM was built to support Arthur Andersen, the tax validation is
robust. It ensures assets imported or entered manually conform to IRS rules
2. Is there a method of representing an asset at a point in time?
a. Need information for audit and historic purposes
b. Need to be able to historically look at value of asset at point in time
Fixed Assets Manager™ (FAM) Response: FAM allows you to store and run
reports on current year, as well as on historical data. You can run historical
reports on data starting from the year it was entered in FAM. Reports can be
run on yearly, monthly, quarterly, or any user-defined date range. Reports can
be run for all assets, one asset, or anywhere in between. You will see all
transactions that occurred to the asset with the report range (i.e. transfers,
dispositions, splits, etc.).
3. For Sales Tax audits, is there the ability to link back to AP Invoices and Images?
Fixed Assets Manager™ (FAM) Response: FAM has an Attachment tab for each
asset. Pictures, invoices, spreadsheets, etc. can all be stored in the database for
historical record keeping. In addition, each asset also has a text only tab which
can be used to store any notes related to the asset.
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4. Can foreign assets be restated back to USD within the application with the correct
Fixed Assets Manager™ (FAM) Response: FAM now has currency conversion
capabilities through a new product extension module. The module is flexible in
its conversion approach. It can either pull data out of the GL or other data sources
for the global data, can apply exchange rate conversions in any currency
translation and push the data into FAM. Otherwise, it can pull any book data out
of FAM and apply currency translations. Currency rates can be tracked and
maintained in tables in the tool and applied to convert the US dollar amounts out
of FAM. During implementation we would apply the best approach based on a
company’s requirements. Additionally, the product extension will allow for ad
hoc reporting, business analysis, modeling, forecasting, property tax
declarations/reporting, and many other data mining/use requirements.
5. Will the application maintain the historic location of the assets?
a. This is an issue with the data loads
b. Need by company, location, etc.
Fixed Assets Manager™ (FAM) Response: FAM fully supports maintaining the
historical location of an asset, both domestic and foreign locations. An item such
as Location would be stored within a user-defined Accounting Information field
within FAM. The Location will be stored for any point in time as long as an intra
or inter-entity transfer is performed on the asset. Historical data starts from the
year the asset was entered into FAM, and will continue to be tracked and reported
on throughout the life and disposition of the asset. Location reports used for a
variety of needs throughout the tax lifecycle are standard in FAM. In addition,
easy reporting for Property Tax compliance is streamlined through the use of
FAM. FAM also has the ability to integrate with Property tax systems and/or to
create an extract to be imported into a property tax system.
6. Is there the ability to store the historic value of asset?
a. Cost versus acquired value
b. Place/method of storing value
Fixed Assets Manager™ (FAM) Response: Normally, if the historic cost
is not being used in any calculations and you are adding newly acquired
assets (from an acquisition), you would store the historic cost in a user-
defined Accounting Information field or just as a note on the Notes tab. If
pre-existing assets get re-valued, a new book cost can be entered for
each/all books. The asset's prior cost can then be stored in the manner that
I just explained. The new cost will be used for the entire current
accounting year. Running historical reports will show the old cost that
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was in place at the time. All Accounting Information fields can be
7. Are FAS 109 reports available in the application?
a. Report book vs tax book information?
Fixed Assets Manager™ (FAM) Response: FAM provides a Reconciliation
Report that allows you to compare data from any two books. At the end of this
document you will see a list of all the reports that come pre-defined within FAM.
An unlimited number of user-defined reports can also be created. Lastly, FAM
also offers a custom reporting, analysis and planning module that provides
unlimited flexibility in reporting and modeling – complete access to your data.
8. Is there the ability to maintain the original asset acquisition date versus the
corporate acquisition date?
Fixed Assets Manager™ (FAM) Response: You would store the original
acquisition date in a user-defined Accounting Information field or just as a note
on the Notes tab. This field could then be added as an extra field on the
9. Can you separate the corporate assets among various legacy companies?
a. Need to track/report the assets based on original organizations
Fixed Assets Manager™ (FAM) Response: FAM allows for tracking and
reporting on assets among various companies. All legacy data such as this can be
stored in a user-defined Accounting Information field. This way you could do a
“Find” of those assets meeting this certain criteria. Or, you could run a report
grouping on that Accounting Information field so each asset having a legacy
company source will be group together for easy viewing and sub-totaling. You
can also create custom views, so you can see the individual companies under a
parent company umbrella.
10. How will Impairments/negative goodwill be flagged?
Fixed Assets Manager™ (FAM) Response: FAM can track both tangible and
intangible assets such as “goodwill”, patents, etc. FAM can handle appropriate
amortization of intangible assets and/or be set to not allow calculations to occur.
FAM will also calculate negative depreciation.
11. How will system handle Mass Additions where Adjustments are updating old
a. Will the system make changes in the current year?
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Fixed Assets Manager™ (FAM) Response: FAM fully supports mass additions.
Mass additions to the FAM system will most likely be handled by Import. There
are Import options allowing you to flag which type of data gets updated, i.e you
have the option to replace existing data or not. There are five different types of
Imports that can be run that will allow almost any type of update you need. FAM
also provides a specific import type called Update Asset for updates to one or
more fields for existing assets.
12. Will there be reports that list the changes to assets that are made in the current
Fixed Assets Manager™ (FAM) Response: FAM tracks many things that happen
within the FAM database. Some of these are entity specific, some asset specific,
and some feature specific. At the end of this document I provided a rough list of
the items we track. The events can be seen within the program and in a special
report. We also have an Additions report that lists out all assets added during a
certain time range. Also, each asset shows the time and the person who last edited
13. Can we create Summary by location reports for state apportionment taxes?
Fixed Assets Manager™ (FAM) Response: FAM fully supports and facilitates
state apportionment by supplying reports by location. All of FAM's reports can
be grouped by any Accounting Information field, such as State, and then reported
on at a detailed or summary level. Additionally, our FAM extension module
allows for further help with apportionment by providing business intelligence and
modeling to handle all state apportionment complexities.
14. Do the ERP patches maintain the current tax laws, rates, etc?
Fixed Assets Manager™ (FAM) Response: FAM was originally built by and for
the Arthur Andersen tax practice and its’ clients. Senior ex-Andersen personnel
still maintain and support the application today. Red Moon Solutions provides
updates to the programs as soon as any new depreciation rules are passed into
law. The program is usually updated at least two times a year to include the new
year's tax forms (Form 4562, Form 4797, Form 4684 and Form 6252) and to
update the Auto and Section 179 limits. With Red Moon Solutions, you have
access to tax and technical personnel via direct phone calls and email. As far as
we are aware from our knowledge of all other ERP modules, tax law changes
need to be coded in custom or separately, therefore there can be cost and delay
associated with these endeavors. Additionally, we traditionally find that tax law
is not effectively and always correctly applied. When we recalculate federal and
tax books, we usually find differences due to incorrect ERP coding.
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15. What are all of the items that can be updated or modified once the information is
loaded into the tax set of books?
Our easy-to-use Import function allows all asset data to be re-imported or
updated. We have a very powerful 'Update Asset' type import that can update any
field for an asset. All data elements related to FA changes above can be
modified/updated in FAM.
NOTE: Other considerations are a company’s normal processing cycles/requests,
etc. Think about what you might have to do to analyze your valuation allowance
and whether the ERP option will support you in this effort. Our lead Big Four
partner that implements ERP FA modules every day, recommends our solution to
clients who have material fixed asset management requirements. Any forecasting
for future, and/or recalculating past blocks of assets will not be properly supported
by those modules. Also, consider what happens when you have state apportionment
changes, property tax declarations, provision needs (FIN 48) and other provisioning
and planning, and acquisitions and dispositions, with a large asset base this could
lead to quite a bit of additional requirements.
Red Moon Solutions - Fixed Assets Manager™'s pre-defined reports & forms:
• Forms 4562, 4684,4797,6254 for current and previous 2 tax years
• Monthly Period Data Report
• Journal Entry Report
• Net Book Value Report
• Period Data Report
• Periods Setup Report
• Reconciliation Report
• Asset Attachments Report
• Asset Detail Report
• Data Entry Report
• Non-Active Asset Report
• Notes - Asset Report
• Notes - Retirement Report
• Asset Types Report
• Entity List Report
• Event Log Report
• Additions Report
• Adjusted Basis Report
• Classification Summary Report
• Depreciation Report
• Fixed Assets Report
• Fully Depreciated Asset Report
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• 4562 Report
• 4626 Worksheet Report
• Bonus Depreciation Report
• Mid-Quarter Report
• Investment Tax Credit Report
• Preference Item Report
• Property Tax Report
• State Bonus Adjustment Report
• Units of Production
• Activity Report
• Disposition Detail Report
• Bulk Retirement Report
• Inter-Entity Transfer Report
• Retirement Report
• Unrecognized Gain/Loss Report
• Split Asset Report
In addition, we have an unlimited number of reports for user-defined fields that can be
generated. FAM also offers a Business Intelligence extension (module) that allows for
complete data access for custom and ad hoc reporting, analysis, modeling and
forecasting, etc. It provides an easy to implement and utilize solution that has an Excel
front-end allowing you all the power of Excel and all the security of an application
Fixed Assets Manager keeps track of the following events/tasks after they are performed:
• Adding entities, books, roles to entity access, or attachments to an asset
• Application of Mid-Quarter changes for an entity
• Backing up a Fixed Assets Manager database
• Calculating period data
• Changing calculation options, asset types, book types, books, and data on Entity Setup
• Closing year end and periods
• Creating periods - Additionally, records when the two Accounting Information Fields tied
to the period are saved.
• Deleting entities, books, book types, accounting information fields, assets, asset types,
periods, inter-entity transfers, intra-entity transfers, roles from entity access, or
attachments from an asset.
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• Duplicating book data
• Exporting periods
• Importing data
• Making offline copies of a Fixed Assets Manager entity
• Reapplying asset types
• Renumbering assets
• Restoring a Fixed Assets Manager database and offline copies of a Fixed Assets Manager
• Retiring a mass amount of assets using the Bulk option
• Reversing close year end and closed periods
• Running maintenance on the database
• Splitting/Unsplitting assets - Records when an asset is split or unsplit.
• Updating assets through the Life to Date Utility
• Updating periods - Records when a different book is selected, when any of the
Accounting Information Fields are changed after creating the initial periods, or if the
Prorate Option is changed after the initial period setup.
• Creating new entities
• Upgrading to a new FAM version
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