In a direct purchase agreement, the establishment owns the instrument and associated accessories. You can either pay in advance for the entire purchase, or finance it either by the seller or by a third-party lender. The advantage of this scenario is that, although the instrument may have a useful life of five to seven years, an installation can use it longer if the instrument is in good condition. In addition, information provided in a direct purchase scenario is generally broken down by instrument, service, responsive and consumable, as well as, if applicable, financing costs. This detailed information facilitates cost developments, facilitates initial/ongoing negotiations, and allows for greater savings. The downside of this purchase scenario is that negotiating each part of the agreement is a tedious process. The pre-requisite capital would be required, which would lead the laboratory to go through a generally lengthy capital approval process, and the technology may be obsolete before you have exceeded the useful life of the instrument. Allan scores good points. Even if there is no resale value of the equipment, the fair value faS157 is close to zero, which in turn argues for random processing of the devices with the reactive costs incurred. I wouldn`t be particularly concerned about the “payment plan” (i.e. if you buy a lot of reagents this quarter and none in the next quarter).
Depreciation is a systematic and logical way to record costs over time and does not necessarily reflect “real” depreciation for a given period of time. To depreciate the equipment, you can simply do it straight during the contractual period. While some kind of usage-based depreciation is also possible, this can significantly increase the load — especially if the useful life (in terms of usage) is not known and/or you don`t have data sets that tell you exactly how many times it is used. Safeguard clauses There are important clauses that should be inserted into any agreement to protect the supplier, many include rental or purchase choices. First, price protection can be put in place by the multi-year price increase or discount agreement during and after the agreement. Second, including a performance guarantee clause and a reaction time guarantee, reliable performance and fast service time are guaranteed. Other safeguard clauses to consider are the future availability, new models or extensions before delivery and a protection clause against obsolescence. Purchasing OptionsIn most clinical laboratory environments, vendors offer three options for purchasing laboratory equipment: one direct purchase and two leasing scenarios, reagent rental and a cost-per-report agreement. All three options include the requirement to purchase reagents and consumables necessary for the operation of the devices. Are there other conditions in the agreement? What happens, for example, if you terminate the contract prematurely – a specific payment for the equipment or just a return of the equipment? At the end of the defined period, if you extend, you receive new equipment? Are equipment costs assessed and reported separately? Is there an additional charge for VAT, property tax and/or insurance? Who is responsible for repairs and insurance? What is the relative value of the equipment in relation to the obligation to purchase reagents. I believe that these other facts will help determine whether the equipment made available is in fact outside the obligation to purchase the reagents.
If so, I would always say that the equipment provided by the seller is random and has no separate value for you. Ray, the problem is how is she going to build the value to be depreciated? It is likely that she would have to pay rent and pay it off as a purchase in exchange for payments to the reagents. I find it difficult to put this responsibility on the books because it could not be confirmed as payable.