What are 'Furniture, Fixtures & Equipment - FF&E'

Furniture, fixtures and equipment, abbreviated FF&E or FFE, are movable furniture, fixtures or other equipment that have no permanent connection to the structure of a building or utilities. These items depreciate substantially over their long-term use, but they are definitely important costs to consider when valuing a company, especially during liquidation procedures.

Examples of FF&E include desks, chairs, computers, electronic equipment, tables, bookcases, and partitions.

Sometimes, the term furniture, fixtures and accessories (FF&A) is used in place of FF&E.

BREAKING DOWN 'Furniture, Fixtures & Equipment - FF&E'

Accountants compile all of the furniture, fixtures and equipment (FF&E) into a separate line item in a budget or a financial statement under tangible assets. FF&E go into a project's final cost so an auditor can determine if a purchase comes under budget or over budget. FF&E generally have a life span of three years or more.

Criteria

An asset goes into the FF&E category if it is used by a business to conduct its normal, daily operations. A chair for the front desk person at an office building counts as an FF&E item because the employee needs the chair to perform daily tasks to keep the business running smoothly. The telephone sitting on the desk is categorized the same way; the administrative assistant cannot function without answering the phone and forwarding calls. The person's computer, printer, filing cabinet, desk organizer, and pen holder all count in the FF&E category when determining how much these assets are worth.

For example, the Federal Reserve lists several types of FF&E it uses for its normal operations. Automotive equipment, such as trucks, cars and tractors, fall into this category. Material handlers, fork lift trucks, drill presses, and currency counters are all equipment this agency uses on a regular basis. Security equipment, such as X-ray scanners, biometric devices, magnetometers and access control devices, fall into this category because Federal Reserve staffers can move this equipment out of the building.

Depreciation

Financial officers determine depreciation of FF&E in several ways. The first rule of thumb is to examine the useful life of the item. A chair may last 20 years, but a desktop computer's life could end after three years when the company needs newer technology.

The Federal Reserve uses the straight-line method of depreciation to determine the value of FF&E items. This means the formula is a straight line. In this case, the Federal Reserve takes the cost of the asset minus the salvage value and then divides the result by the estimated useful life, in months, to arrive at a monthly depreciation charge. Depreciation continues until an item's useful life is reached.

As an example, a car is worth $10,000 new, and its useful life is three years. The maximum salvage value of the vehicle is 20%. When the agency first buys the car, the monthly charge is [$10,000 - (20% x $10,000)] / 36 months. The final total is $222.22 at the end of the first month. The book value of the car changes each month, so the Federal Reserve uses new values every month to ascertain its value for accounting purposes.

Businesses operating in the hospitality industry make a substantial amount of investment in  furniture, fixtures & equipment. These assets are essential to a hotel's core business operations, considering the fact that the interior furnishings of a hotel make up significant expenses. For example, FF&E budget categories can include hotel room furnishings and decorative items, common area furnishings, restaurant, bar and conference room furnishings and equipment, office furnishings, storage equipment, computers, projectors and other items relating to technology. An analyst evaluating a business in the hospitality sector would, therefore, closely scrutinize the FF&E assets of the company, factoring in depreciation in his or her analysis.

RELATED TERMS
  1. Shell Lease

    A commercial lease in which a tenant rents a property with an ...
  2. Straight Line Basis

    A method of computing amortization (depreciation) by dividing ...
  3. Accumulated Depreciation

    Accumulated depreciation is the cumulative depreciation of an ...
  4. Salvage Value

    The estimated value that an asset will realize upon its sale ...
  5. Declining Balance Method

    A common depreciation-calculation system that involves applying ...
  6. Depreciable Property

    Depreciable property is any type of asset that is eligible for ...
Related Articles
  1. Investing

    Growing Competition Dims Furniture Makers' Future

    Weak demand and growing competition will increasingly dampen U.S. furniture makers' prospects.
  2. Investing

    An Introduction To Depreciation

    Companies make choices and assumptions in calculating depreciation, and you need to know how these affect the bottom line.
  3. Insurance

    Investing In Medical Equipment Companies

    Learn the basics about medical equipment companies and how investing in them can benefit growth and value investors alike.
  4. Investing

    How Amazon Will Crush Williams-Sonoma, Wayfair

    Amazon is planning an aggressive push into big-box furniture.
  5. Investing

    9 Cost-Effective Interior Design Tips

    With these 9 tips and a little enterprising DIY spirit, you can make interior design cost-effective and even transformative.
  6. Investing

    Book Value: How Reliable Is It For Investors?

    In theory, a low P/B ratio means you have a cushion against poor performance. In practice, it is much less certain.
  7. Small Business

    New Year Planning For Business Owners

    Make a resolution to start your business off on the right foot in the new year.
  8. Managing Wealth

    3 Reasons To Buy Government Surplus for Your Small Business

    Learn why it's wise to access government surplus auctions to buy furnishings, equipment and other items to start a new business or expand an existing business.
  9. Managing Wealth

    Cars That Depreciate In Value The Most

    You can't avoid depreciation on your car, but you can avoid certain models that depreciate in value a lot.
RELATED FAQS
  1. What are some examples of the main types of capital expenditures (CAPEX)?

    Learn about different expenses with acquiring assets that are considered capital expenditures and should be depreciated over ... Read Answer >>
  2. What are the different types of tangible assets?

    Learn what tangible assets are, what other names they are called, what specific items are included and how they are handled ... Read Answer >>
  3. What's the difference between amortization and depreciation?

    Learn the difference between amortization, depreciation, and depletion and how companies use these accounting methods to ... Read Answer >>
  4. When should I use depreciation expense instead of accumulated depreciation?

    Distinguish differences between depreciation expense, which is reported on the income statement, and accumulated depreciation ... Read Answer >>
  5. What are the different ways to calculate depreciation?

    Read about some of the different allowable methods of calculating depreciation expenses as allowed by generally accepted ... Read Answer >>
Hot Definitions
  1. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  2. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  3. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  4. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  5. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  6. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
Trading Center