Equipment & Depreciation Policy

The Problem: Someone buys a $500 tool once, but counts $500 in EVERY project — that’s a cheat. The Solution: Depreciation spreads costs fairly over the tool’s useful life.

The Core Rules

1. Serial Number Registration (Immutable)

All equipment >$100 MUST be registered with serial number in the IP Ledger.

This record is immutable — it cannot be changed. Good reason to tell the truth.

2. IRS Compliance Responsibility

Liana Banyan does NOT keep your tax records. YOU are responsible for IRS compliance.

What we DO:

• Keep PROJECT records in the IP Ledger
• Record equipment with serial numbers (immutably)
• Provide exportable data for your tax preparer
• Facilitate hiring member accountants/tax preparers

What we DON’T do:

• File your taxes
• Guarantee your compliance
• Keep copies of your personal tax documents

3. Two-Phase Equipment Economics

Phase 1: Initial Cost Recovery

• First project(s) can include equipment purchase cost
• OR finance through Joules Cache (your collateral)
• You recover your investment through early projects

Phase 2: Depreciation

• After initial cost is recovered, equipment depreciates
• Per-project cost = remaining value ÷ remaining projects
• Eventually reaches $0

EXAMPLE: $500 Drill

Job 1: Include $500 in costs → Customer pays for drill
Job 2+: Depreciate remaining wear value
        If drill lasts 100 more jobs: $0 + wear allocation
        
OR

Job 1: Include $100 (partial) in costs
Job 2: Include $100 in costs  
Job 3: Include $100 in costs
Job 4: Include $100 in costs
Job 5: Include $100 in costs → Drill fully paid
Job 6+: Depreciate remaining useful life

How Depreciation Works

Example: $500 Power Tool

Once the tool is fully depreciated, it costs $0 per project (until replaced).

Standard Depreciation Schedules

Power Tools & Machinery

Technology

Kitchen/Food Equipment

Workshop/Craft

Tracking in the System

Equipment Registry

When you add equipment to your Cost+20% calculations:

1. Register the equipment — Name, purchase date, price, receipt
2. Select depreciation schedule — Standard or custom (with justification)
3. System calculates — Monthly/per-project depreciation automatically
4. Tracks remaining value — Shows when fully depreciated

What You See in Dashboard

┌─────────────────────────────────────────────────────────┐
│ EQUIPMENT: DeWalt Power Drill                           │
│ Purchase: $299.00 on 2025-06-15                        │
│ Schedule: 5 years (60 months)                          │
│ Monthly depreciation: $4.98                            │
│ ───────────────────────────────────────────────────────│
│ Depreciated so far: $39.84 (8 months)                  │
│ Remaining value: $259.16                               │
│ Fully depreciated: 2030-06-15                          │
└─────────────────────────────────────────────────────────┘

Replacement Rules

When Can You Replace?

Early Replacement Process

If equipment needs replacement BEFORE fully depreciated:

1. Document the reason — Photos, description of failure
2. Remaining value — Must be written off (not carried forward)
3. New equipment — Starts fresh depreciation schedule
4. Optional: Sell old equipment → reduces new equipment basis

Example:

• Drill bought for $300, 2 years into 5-year schedule
• Remaining value: $180
• Drill breaks beyond repair
• Document: Photo of broken drill, “motor burned out”
• Write off $180 (cannot add to new drill cost)
• Buy new drill for $350 → starts fresh 5-year schedule

The Upgrade Pathway

“I want an upgrade” IS ALLOWED — but with requirements.

Requirements for Voluntary Upgrade

1. Find a recipient member — Another Liana Banyan member who will receive your old equipment
2. Cover the transfer — Pay MARKS (backed by your Joules Cache) for the transfer
3. Cover the FULL new equipment cost — Your Joules Cache must hold the ENTIRE cost of the new equipment (not just the difference)
4. Recipient signs off — After they confirm receipt and working condition
5. Hold released — Your Joules Cache hold is released after sign-off

The Process

┌─────────────────────────────────────────────────────────────┐
│ STEP 1: INITIATE UPGRADE                                    │
│ • List old equipment for transfer (serial #, condition)     │
│ • Specify new equipment you want                            │
│ • System calculates: MARKS for transfer + Full new cost     │
│                                                             │
│ STEP 2: FIND RECIPIENT                                      │
│ • Post to member marketplace                                │
│ • Another member accepts the old equipment                  │
│ • Recipient agrees to sign off after receiving              │
│                                                             │
│ STEP 3: JOULES CACHE HOLD                                   │
│ • Your Joules Cache is HELD for:                           │
│   - MARKS cost of transfer                                  │
│   - FULL cost of new equipment                              │
│ • This is collateral — not spent yet                        │
│                                                             │
│ STEP 4: TRANSFER EXECUTION                                  │
│ • Old equipment shipped/delivered to recipient              │
│ • Recipient inspects and tests                              │
│ • Recipient signs off in system                             │
│                                                             │
│ STEP 5: COMPLETION                                          │
│ • Joules Cache hold RELEASED                                │
│ • Old equipment removed from your registry                  │
│ • New equipment added with fresh serial number              │
│ • New depreciation schedule begins                          │
└─────────────────────────────────────────────────────────────┘

Why Full New Cost Must Be Covered

Rationale: This prevents gaming where someone “upgrades” repeatedly without real collateral. You must have skin in the game for the full new equipment value.

Recipient Benefits

The member receiving old equipment:

• Gets functional equipment at no cash cost
• Only pays in MARKS (services they provide)
• Equipment is registered to their account
• They start their own depreciation schedule
• Can use for their own projects

If Recipient Doesn’t Sign Off

If transfer fails, your Joules Cache hold is released minus any damages.

Preventing Gaming

Red Flags (System Monitors)

Harper Review

For flagged equipment claims, a Harper reviews:

• Is the replacement justified?
• Is the documentation adequate?
• Does the pattern suggest gaming?

Harper decisions:

• Approve — Replacement allowed
• Request more info — Need better documentation
• Deny — Gaming suspected, equipment cost disallowed

Appeals

If denied, member can appeal:

• Provide additional documentation
• Request different Harper review
• Escalate to Steward if needed

Consumables vs. Equipment

Consumables (Count Each Time) ✅

Equipment (Depreciate) 📉

The $100 Rule

• Under $100: Can expense immediately (count once in project where purchased)
• Over $100: Must depreciate over useful life

Maintenance vs. Replacement

Maintenance (Expense as Incurred)

Replacement (New Depreciation)

Example: Woodworker’s Equipment

Sarah’s Workshop

Per Project (if 4 projects/month):

• Equipment cost allocation: $19.17 ÷ 4 = $4.79 per project

After 5 years:

• Router and hand tools fully depreciated: -$9.17/month
• New monthly depreciation: $10.00
• Per project: $2.50

Software Implementation

Auto-Calculations

The platform automatically:

1. Tracks all registered equipment
2. Calculates monthly depreciation
3. Allocates to projects based on usage
4. Alerts when equipment is fully depreciated
5. Flags suspicious replacement patterns

Receipts & Documentation

• Upload receipt photos
• System OCR extracts price/date
• Stored securely for Harper review if needed
• Exportable for tax purposes

Integration with Cost+20%

When you price a project:

Materials:        $150.00
Labor:            $200.00
Equipment (auto): $  4.79  ← System calculates from depreciation
Overhead:         $ 25.00
─────────────────────────
Total Cost:       $379.79
+ 20%:           $ 75.96
─────────────────────────
YOUR PRICE:      $455.75

Summary

“Fair costs for honest work. Gaming the system hurts everyone.”

FOR THE KEEP!