Depreciation of shop fit-outs spreads their acquisition and production costs over a set useful life on the balance sheet. For retail chains, this mainly concerns the tenant fit-out: furniture, drywall, ceilings, lighting and technical installations they install themselves in leased premises.
Three periods that rarely coincide
Three periods run in parallel for shop fit-outs: the useful life for accounting purposes, the lease term and the technical service life of the components. In practice, they rarely match. A shelf can be fully depreciated while the lease continues and the shelf will technically last for many more years.
Book value and residual value
At the end of depreciation, the book value is zero. That says little about the actual value of the component. The residual value, meaning its material and use value, may well remain. The end of depreciation and the time of a remodel often diverge. Fully depreciated fit-outs are then easily treated as worthless, even though they could be reused or relocated.
What it means for remodel decisions
Anyone planning remodels across a store portfolio should therefore look beyond book value and check how much value is still embedded in the components. This decision is described by Restwertrückführung. It is put into practice through reuse or an orderly strip-out. More on this in the article Why book value drives the wrong remodel decision.
Note: This entry explains the principle. Useful lives and tax treatment must be clarified with a tax adviser in each individual case.