As long as you are consistent in your definition of capital with respect to IRS criteria and internal policies it should be fine (full disclosure my evening MBA was ca '00, accounting 101 was '97 ) Specific capitalization of brand & good will (artwork and label design) and vineyard development is clear.Īs Brian notes, when you have a used bbl for $50-100, its should probably be expended, vs capitalized. There are generally items which require tax accounting capitalization (land and buildings) and some which are optional depending on useful life and cost. The question of capitalization (and hence requisite depreciation) is what I was addressing. I have a nice little spreadsheet for the materials supplies, send me an email if you would like a copy.ĭisclosure…yes I am ex-PW and Coopers &Lybrand and an MBA in finance, so apologies if I am showing my geekiness! This however is totally different than the statutory accounts. It’s good practice for your own accounting and accurate COGS is to allocate some of your over heads like rent and barrels to the actual cellar costs by bottling (I do it by lot and then combine after blending. You may also just keep track of these expenses in a spreadsheet and have each year’s starting inventory bulk and bottles and then the ending inventory and you can calc out what you can allow against income for taxes. It is also important to keep track of your “material supplies” grapes, labels, bottles, yeast, etc for each bottling because you can only deduct the expense once you have sold the wine, so setting up Quickbooks sonthat each time a bottle or case is sold the cost is moved from the balance sheet to the P&L to be expensed. If you are submitting you accounts on a cash basis, the barrels are depreciated over 5 years-new or used, regardless of cost. I think there is a little confusion here between your tax accounting and management accounting. May I suggest the KISS method?ĭisclaimer: Although I have taken ACCT classes, I am not an accountant, nor do I or have I dealt with it closely on a day to day basis as a winemaker (ie entering QB data or keepig a ledger), although I am closely involved in budgeting. Your last question is getting a little too intricate. Reconditioning a barrel with fixed new inserts might be tougher to assign…I would probably consider that cap?įor internal use, I would suggest finding a way to work it (it being the breakdown of new and used oak and length of time used, hence share of depreciation expenses) into your “internal COGS” for your individual products so you have a reasonable and accurate idea of what your real costs are to produce each wine (and oak and fruit costs are the two biggies here), but I think from an IRS point of view it isn’t necessary. I would agree that most adjuncts belong in a “fermentation supplies” or “cellar supplies” expense account. I think you can choose your own depreciation schedule (up to 5 years) as long as you’re consistent year over year, but could be wrong on that. Never been anywhere where they looked at oak bbls as anything other than a capital expenditure.
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