Copiers are a necessary evil at an office. These Volkswagen-sized monoliths suck time and money out of your business daily. Nearly no one who leases a copier/printer enjoys paying that bill.
As of 2019, your leased machine of any size must be put on your asset sheet at the "fair market value.” It cannot be treated as a rental-type monthly expense anymore; they must hit your balance sheet.
Operating Leases or Fair-market buyout option leases will be treated as an asset. If you lease multiple machines, this can seriously impact your financial statements.
“Fair Market Value” is a ridiculous notion. The dealer, who actually owns the machine, can put any buyout price they want on it. There’s zero transparency and no reference points in the document business. The dealers own the machines, so in effect they dictate the costs.
Capital Leases, or dollar buy-out option leases, are set up more like a loan where you own the machine, at the end, for $1. Both types of leases now need to be on your balance sheet. Your copier salesman’s arbitrary buyout number is now on your P&L’s. The consequences of not applying these machines correctly will sting. Even worse, if you have a maintenance agreement (click charges, CPP for color/BW copies ) included in your lease, these now need to be separated into 2 agreements.
To make things easier, have your leases audited and reviewed by an independent company, not a copier dealer or managed print services company. Alert your CPA that this is a new problem to be addressed under Topic 842.
Get your free assessment to uncover:
Contact us for a free lease audit to see your options.