B Depreciation systems

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Assignments

Name of assignment

Depreciation costs of existing assets.

Situation

As there is no balance sheet, you can only go by the operating review to find out how depreciation of assets in the hotel might have been done so far.
This means, as new management it is very unclear which choices have been made in depreciation systems. The only thing we know so far, is that new investments would be linearly depreciated in 4 years without any residual value.

Goal

Now you take over and have a new strategy, this is the right moment to make things more clear. Jill Jandal want to have insights in the total of the depreciations to be able to assess your new strategy and new investments in a better way.

Task, deliverable

Look at the operating review of the years available, this is all you have.

• Try to find out by using these data what the depreciation system has been so far.
• Looking ahead, trying to organise things more clearly, give your opinion on the most adequate depreciation system concerning the following six assets-groups

1. Rooms (inventory)
2. Premisses
3. Food & beverage (stock)
4. Inventory (furnishing) restaurant
5. Kitchen equipment
6. Furnishing: hall, reception, banqueting halls (setup, furnishing, equipment) e.g.

And:

• Explain for each what the accounting rules are (are there choices at all?). Consider your city to be in any European country of your choice.
• Explain for each why this method, and the effect on the operating review (give calculations) and net profit.

Assessed elements

• Are the depreciation systems chosen, used correctly?
• Do the chosen depreciation systems match the assets concerned?
• Is the effect on the operating review analysed, and calculated well?
• Are all of the sources accounted for?

Additional information

• Depreciation

• Accounting tools
• Choosing a depreciation system
• General depreciation System
• Example issues, beware of the local setting
• Depreciation and EBITDA

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