What Is Furniture, Fixtures, and Equipment (FF&E)?

Furniture, fixtures, and equipment (abbreviated as FF&E or FFE) refers to movable furniture, fixtures, or other equipment that have no permanent connection to the structure of a building. These items, which include desks, chairs, computers, electronic equipment, tables, bookcases, and partitions, typically depreciate substantially over their long-term use but are nevertheless important costs to consider when valuing a company, especially during liquidation events.

These items are sometimes referred to as furniture, fixtures, and accessories (FF&A).

Key Takeaways

  • Furniture, fixtures, and equipment (FF&E) are items that are not permanently affixed to a building and are consequently easily removable from their respective locations.
  • For accounting purposes, each FF&E item has a different useful life, according to IRS guidelines.
  • Companies account for wear and tear of FF&E items by depreciating their values over their useful lives.

Furniture, Fixtures, and Equipment Explained

An asset is classified as FF&E if it's used by a business for normal daily operations. For example, an office receptionist relies on his or her desk, chair, telephone, computer, desk organizer, and pen holder to conduct routine activities throughout the normal course of doing business.

Accountants categorize FF&E as tangible assets, under separate line items on financial statements and other budgeting documents. The FF&E balance is then added into a project's total costs to determine if an initiative comes in over or under budget.

Real-World Example of FF&E Accounting Treatment

Accountants spread the acquisition costs of FF&E items over time by steadily depreciating their values over their lives. But to accomplish this, accountants must first correctly determine the useful life of each item, based on IRS guidelines.

Although FF&E items typically have useful lives of one year or more, they may vary substantially, from one item to the next. For example, while a desktop computer may be deemed technologically outdated after three years, according to the IRS, it has a useful life of five years. On the contrary, the IRS assigns office furniture a useful life of seven years.

Security equipment, such as X-ray scanners, may be considered FF&E, because these items may be removed from a building's premises and placed elsewhere.

Real-World Example of FF&E Depreciation

Let's assume a new car is worth $10,000, and it has a useful life of five years, according to the IRS. Let's further assume that the vehicle's maximum salvage value is 20%. When a company first buys the car, it records the monthly depreciation charge as follows:

$10,000(20%×$10,000)60 Months=$133.33\begin{aligned} \frac { \$10,000 - (20\% \times \$10,000) }{ 60 \text{ Months} } = \$133.33 \end{aligned}60 Months$10,000(20%×$10,000)=$133.33

The depreciation charge is $133.33 at the end of the first month. The net book value of the car is calculated as the difference between the original book value and the amount of its accumulated depreciation over its useful life.