@lubos please how about the ability to use “Freight in” to capitalise expenses to a Fixed Asset when buying a fixed asset?
With this we will Select Fixed Asset and select “Inbound Freight, Handling and Other Expenses” and enter all expenses related to obtaining that fixed asset. Accounting standards prescribe capitalising all directly atrributble costs of obtaining a fixed asset to the cost of the fixed asset (Property, Plant and Equipment)
I think this is stretching too far… I mean it’s typical to purchase 20 inventory items on single purchase invoice so special Freight-in functionality which will spread the cost among 20 inventory items is useful.
How is it useful for fixed assets? You don’t typically buy 20 fixed assets at once and even if you do, it’s so rare that you can enter the cost for each line item manually.
I get your point. 
We have just purchased 16 fixed assets from a foreign supplier, and it would have been useful to have been able to use freight-in to allocate the freight, duty, and clearing charges automatically. But as @lubos pointed out (nearly six years ago! Do you still feel the same way?), it’s not a common procedure, and doing it manually for 16 items was fine.
However, I would like to present another use case for extending freight-in functionality to fixed assets and goods being assigned to expense accounts:
We frequently order 50 to 200 items at a time. Most of these will be stock going into our inventory, but there will usually be a few that are consumables for our business, and sometimes a couple that are fixed assets. They are all mixed together on the same invoice – the supplier is not interested in what they’re being used for. Until now I had assumed that the freight-in charges would be distributed across these too, but I now realise they are not. (I confirmed with a test business.) I guess it should have been obvious when selecting Freight-in populates the Account column with “Inventory on hand” in the purchase invoice edit screen, but I didn’t give it much thought.
So, is this a good enough motivation to have this moved into the Ideas category? Or is someone able to present a counter argument and offer alternative suggestions for our situation above?
I can think of several counterarguments right away:
- The Freight-in feature distributes freight-in solely on the basis of purchase costs of inventory items. When lumped together for shipping, it can be very difficult to sort out individual shipping/customs costs on an item-by-item basis. But fixed assets are very frequently larger, more expensive items for which shipping and customs charges are individually identifiable. While it might not be inappropriate in your case, in many cases it would not be justifiable to allocate costs solely on the basis of purchase cost of the asset. Incorporating the feature might work for you, but it could put other users in jeopardy of violating local regulations.
- Allocating freight-in costs to inventory items might produce temporary distortions of average unit costs. But a reasonable presumption is that, as long as those distortions are restricted to the Inventory on hand account, they will average out over a relatively short time frame as inventory is turned over. That would not be the case, however, for fixed assets, where those distortions might persist forever. It could be hard enough to convince an auditor that freight-in distribution according to cost of inventory items was acceptable. Convincing one that it was a reasonable approach for fixed assets mixed in with other types of purchases would be more difficult.
- Modifying the freight-in procedure to incorporate line items that are not inventory items on a purchase invoice means it would incorporate the same process for all users and all line items. What would you do if the supplier includes services on the same invoice? What would you do if the supplier’s invoice specifies shipping costs separately for a large piece of machinery, but aggregates costs for dozens of small pieces destined for inventory? The only alternative would be a laborious, line by line designation of which line items are covered by the Freight-in item. That gets to be more complexity than many would want.
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Thanks @Tut. You’ve raised some good points and helped me to see how it might impact others whose workflows (and possibly regulations too) are different from ours. It’s also got me wondering if we are fully compliant with our own regulations…
My next question was going to be about what you’d suggest for our situation, but I think I’ve worked out an option that is much simpler than I feared it would be:
- We assess how the freight-in costs should be distributed, and do the necessary calculations to determine the costs applicable to the fixed assets and goods being assigned to expense accounts.
- We assign the freight-in costs for the fixed assets and expense items directly.
- We assign the remaining freight-in costs to
Freight-in.
I think it would be much easier to receive them as inventory item, and then use Inventory write-offs to make some of them Fixed assets
While that would work functionally, it would ignore all the issues I raised. You would still end up with freight-in allocated to fixed assets in questionable ways. @GrahamvdR has outlined the method that avoids all problems.
The other reason I haven’t done this is that we must pay VAT for change-of-use-of-goods transactions (such as from inventory to fixed assets or an expense account), so it’s preferable to have everything allocated correctly on the purchase invoice.