1. Client Name, LP Accounting Procedures: General Asset Accounts

2. General Information Available for assets placed in service: – In same year – With same asset class – With same depreciation method – With same recovery period, and – With same convention Treated as single asset for depreciation

3. Advantages of Using GAA Simplified receipt of assets Simplified bookkeeping Simplified disposition of assets Simplified tracking of assets for accounting and tax purposes If any assets are disposed of during a year, depreciation continues unchanged Section 179 expensing still available Eliminates need to track individual components of devices

4. Disadvantages of Using GAA Any dispositions before end of life of the GAA are recorded as the sale of an asset with a ZERO adjusted basis – all proceeds included in taxable income Proceeds taxed as ordinary income / depreciation recapture No losses allowed Election required each year on tax return for assets placed into service that year

5. Procedures Each invoice for purchase of devices segregated into: – GAA for that year – Items to be expensed, ie, templates GAA items booked into Fixed Assets in QuickBooks with date designation Depreciation booked at end of year, quarterly or monthly

6. QuickBooks Changes Some account name changes Separate accounts for office equipment, computers, leasehold improvements, etc. “Device” GAA parent account GAA subaccount with year designator – Devices:2005 – Devices:2006 Separate Excel spreadsheet or database to track serial numbers in particular year

7. GAA Example Assumptions – Units placed into service this year: 200 – Cost per unit: $125 – MACRS recovery period: 5 year – Convention: Half-year Disposition of 75 units in Yr 2 for $50/unit Disposition of remaining units in Yr 4 for $40/unit

8. Depreciation Comparison Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Regular 5,000 6,500 3,000 900 - - GAA 5,000 8,000 4,800 1,440 - -

9. Comparison of Year 2 Sale Regular GAA Sales price 3,750 Adjusted basis 6,000 - Gain/(Loss) (2,250) 3,750

10. Comparison of Year 4 Sale Regular GAA Sales price 5,000 Adjusted basis 3,600 5,760 Gain/(Loss) 1,400 (760)

11. Comparison of Taxable Income Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Totals Regular (5,000) (8,750) (3,000) 500 - - (16,250) GAA (5,000) (4,250) (4,800) (2,200) - - (16,250)

12. Summary Simplifies device acquisition and accounting Over time, net taxable income using GAA identical to tracking discrete devices and/or components Significant time savings No need to change current device tracking methodology