For business owners, FF&E is a vital concept for accounting and tax purposes. Items included in FF&E calculate depreciation in a specific way, which impacts a company’s book value. While it’s an important concept, it can be challenging to wrap your head around what FF&E includes and what it doesn’t include. Many business owners don’t know why this matters and ask, what is FF&E?
You’re in the right place if you feel like you’re standing on uneven ground when discussing FF&E. In this article, we’ll answer all your questions surrounding this concept and help you get on the right track.
What Does FF&E Stand For?
FF&E stands for furniture, fixtures, and equipment. The concept refers specifically to moveable fixtures, furniture, and other equipment without a permanent link to a building’s structure. Items that fall into this category include (but aren’t limited to):
- Electronic equipment
When a company is valued, it’s important to consider these items. Even though they may depreciate quickly over time, they’re still essential cost factors, especially during liquidation events.
You might also hear these items referred to as furniture, fixtures, accessories, or FF&A. This designation refers to the same types of items as FF&E.
Companies will account for the wear and tear of FF&E items by depreciating their values over their lifespan. Each FF&E item has a unique, useful life for accounting purposes.
What Does FF&E Include?
Tangible assets included in FF&E are any movable furniture and even furniture that can be attached to the wall (such as a bookshelf) but won’t damage the integrity of the building if removed. FF&E includes:
- Electronic equipment (computers, terminals, servers, security systems)
- Decorative items (photographs, wall items, shelving)
- Furniture (desks, sofas, chairs)
- Lighting (lamps and lighting fixtures, even if attached to the building)
What Is Not Covered in FF&E?
Immovable assets that are fixed building components are not covered in FF&E. These are common asset types and include (but are not limited to):
- Built-in furniture
- Office Supplies
Industry-Specific Considerations of FF&E
While general information is good to have on hand, it’s more helpful to understand how FF&E impacts your business specifically. Depending on your industry, certain considerations may help you understand how FF&E applies to you individually.
It’s important to know what FF&E is, and it’s a crucial concept to grasp in real estate. If you’re buying or selling an existing business, you need to know that the company’s furniture, fixtures, and equipment are essential elements of its fair market value. This exact concept applies in the case of a business liquidation (bankruptcy, for example).
Knowing the basics of FF&E and its application to your investments can lead you to a fair evaluation of your potential acquired assets.
Hotels have an abundance of assets considered FF&E. These include many furniture pieces (beds, desks, chairs, dressers, tables) along with tech equipment (computers, printers, routers, audio-visual components, televisions). Consider the assets in the guestrooms, conference rooms, business centers, lobby, and more.
FF&E includes textiles, windows, wall treatment, and floor coverings in the interior design industry. There’s more to interior design FF&E than meets the eye, as textiles, window treatments, floor coverings, and more come with specific considerations and codes. Conducting thorough research and understanding all that is involved with this concept is crucial in interior design.
FF&E in retail can include all furniture, lighting, displays, and counters. Retail spaces can also have various electronic equipment to consider in the process.
In food service, you have industrial and commercial ovens, standing freezers, refrigerators, deep freezers, and more appliances that are considered FF&E. Beyond these obvious assets are pots and pans, food storage containers, cooking utensils, and flatware. You also have furniture like tables and chairs.
Medical and Healthcare
When considering FF&E for the medical and healthcare industry, you’ll want to define what’s considered furniture and what’s considered a fixture. There’s more overlap regarding furniture and equipment, like over-the-bed tables or exam stools. Distinguishing these categories will streamline the budgeting and procurement process and ensure organizational values align with purchases.
How Does FF&E Affect Your Business?
Companies will look for their own specifications for their FF&E, and with careful consideration, you can get more specific on what to consider an asset. The accurate determination of business value means fairly assessing the worth of FF&E.
There are three critical components of FF&E for determining the value of a business. Those are:
These assets are used in the everyday running of a business and are essential for you to understand your bottom line. These tangible items help measure the value of a company accurately when you want to invest in FF&E for your organization. Understanding the inherent worth of these items makes for a more straightforward appraisal down the line.
Begin Managing Your FF&E with Mesa Logistics Today
Managing your FF&E can be a complicated process, and many business owners choose to manage their FF&E. Mesa Logistics Group is a proven leader in FF&E logistics solutions. We offer turnkey freight management, warehousing, installation, and project management services.
Whether in hospitality, retail, healthcare, or government sectors throughout North America, we can serve you. Find out more by getting in touch today.