Accounting policy¶

Purpose: Single source of truth for the policies governing how transactions are recorded, classified, and reconciled across Renfroe Family Holdings' books. Centralizes rules previously scattered across xero-buildout.md, chart-of-accounts.md, vendor-mappings.md, casa-moksha-intercompany-mockup.md, personal-card-business-expenses.md, and decisions/log.md.

Status: v1, 2026-05-10. Provisional sections explicitly flagged inline; provisional ≠ wrong, but they're awaiting a specific advisor confirmation before they harden.

Scope: Applies to the single Xero org "Renfroe Holdings" covering Renfroe Family Holdings, LLC and all US disregarded sub-LLCs. RHG (Mexico) and GK (Japan) maintain their own statutory books with local accountants; this policy file governs the US-side Xero org only, plus the summary JEs that flow in from RHG/GK.

1. Reporting basis¶

Books are maintained on accrual basis for management reporting.
US tax basis = the books, with adjustments at year-end to conform to federal/state tax requirements. Pearce Bevill maintains the book-to-tax bridge (per §38) reconciling book-basis amounts to tax-basis amounts on the 1040 / 5471 / 8858 / etc. Specific form schedules (M-1, M-3, 5471 Schedule H, etc.) are mapped per filing — Pearce determines which.
Cash-flow reporting is generated from the accrual ledger via Xero's built-in cash-flow report; no separate cash-basis books.
Mexican statutory books (RHG): JME maintains separately on whatever basis MX SAT requires for CFDI compliance; flows into Xero only via summary JE.
Japanese statutory books (GK): ABS Partners maintains separately; flows into Xero only via summary JE.

2. Capitalization thresholds¶

De minimis safe harbor: $2,500 / item (matches IRC §1.263(a)-1(f) for taxpayers without applicable financial statements; refresh if Pearce confirms a different threshold applies).
Items below threshold expense immediately, regardless of useful life.
Items above threshold capitalize and depreciate per §3 below.
Casa Moksha capex has its own register at accounting/casa-moksha-capex-inventory.md and the structured subledger at accounting/property-capex-register.csv. Do NOT expense items above threshold to the property's R&M line.

3. Property improvements vs repairs¶

Per the IRC §1.263(a)-3 BAR test: - Betterment (materially adds to value, productive output, or efficiency) → capitalize. - Adaptation (changes property's use) → capitalize. - Restoration (returns property to like-new after deterioration beyond normal R&M) → capitalize. - Else, expense as repair / R&M.

Specific Casa Moksha standing rules (per accounting/casa-moksha-capex-inventory.md): - Palapa structural work, water-system installs, drain wells, generator installs, biodigestor work, HVAC installs, structural remodels: capitalize. - Plumbing repair, paint, generator repair (vs. install), pool cleaning, routine grounds maintenance, A/C servicing: expense. - Anjona reorganization fees relating to entity conversion paperwork: capitalize as organization costs (15-yr amortization US, similar MX). - Anjona advisory fees relating to ongoing business advice: expense.

4. Depreciation policy¶

US disregarded properties depreciate on Austin's personal 1040 (Schedule E or appropriate schedule). Method/life:
Residential rental property: 27.5 years straight-line MACRS GDS (default; ADS 30 years if elected — defer to Pearce).
Commercial real property (1006 building): 39 years SL MACRS GDS.
Personal property (computers, marina improvements, FF&E): per asset class. Default 5 or 7 years MACRS GDS.
GK (Mita): provisional pending Pearce + ABS confirmation:
US 5471-side: condo classified as foreign residential rental, 30 years SL ADS (foreign-use property defaults to ADS).
Japan-side depreciation method governed separately by ABS for Japanese corporate tax.
Open: §168(k) bonus depreciation eligibility on foreign condo — likely no, but confirm.
Open: cost-segregation candidacy (single-condo split into 1245 vs 1250 components). Marginal at single-unit scale; Pearce advisability call.
Open: depreciation start date — delivery 2025-07-28; Pearce
- ABS to confirm whether placed-in-service date is delivery, first-rental-day, or another convention.
Casa Moksha (RHG-owned): Mexican corporate-tax depreciation governed by JME/SAT. US 5471-side support per Pearce. Provisional: 39-year SL on building shell; 5-7 year on FF&E if cost-seg performed.
Asset disposition: gain/loss recognition only on entity-of-record side (Austin's 1040 for US disregarded; RHG MX/GK Japan for foreign).

5. Revenue recognition¶

5.A — Casa Moksha guest revenue (provisional, pending JME §1 framing)¶

Provisional rule: Guest revenue is earned by RHG (Renfroe Hospitality Group, Mexico), regardless of which account it lands in. RFH (Renfroe Family Holdings) acts as collection agent for the USD-denominated portion that lands in Brex / PayPal / Coinbase.

Recognized when: guest checks out (or when a refundable deposit becomes non-refundable — typically per booking contract terms, often 30-60 days pre-arrival).
Not recognized at booking (deposits are liability, not revenue).
Refunds reduce revenue in the period the cancellation is acknowledged in writing.
Cancellation fees retained from forfeited deposits ARE revenue (period of forfeiture).
Agent commissions (Coworking Tulum, Inner Warrior, Secluded Serenity, etc.) — gross-up: book full guest amount as revenue, agent commission as separate expense (do not net).
Crypto-paid guests (Bitcoin retreat pattern, Dec 2025): book USD-equivalent at settlement-day rate; track BTC at-cost in the crypto subledger; gain/loss on subsequent BTC dispositions handled separately (see §10).

PROVISIONAL — pending JME §1 answer. The §1 question to JME in todo/jme-questions-2026-04-29.md asks whether RHG should recognize CM revenue on its Mexican books or whether RHG-as- landholder is the framing. JME's signed multi-year FS shows ZERO CM revenue on RHG's Mexican books across 2023-2025 — a structural pattern, not a 2025 anomaly. Until JME's substantive answer lands, treat ALL CM-revenue-related Xero entries as management-accounting-only, and post the year-end true-up only after JME + Pearce sign off on the framing.

5.B — Real-estate rental revenue¶

Recognized when: rent due date passes (cash receipts may differ; recognize on accrual basis).
Security deposits: liability until forfeit or return.
Lease modifications (rent abatement, deferral): separate JE per modification, with documentation in legal/.

5.C — Marina sublicense revenue¶

ATX Marine (Dock 1 Slip 10) and Renfroe Marine (Dock 2 Slip 18) are sublicensed; Austin Marine (Dock 8 Slip 7) is personal-use (non-revenue-generating).
Sublicense revenue recognized monthly on accrual.

5.D — Mita Garden Hills rental revenue (pending GK closing year)¶

Recognized on GK's Japanese books on Japanese-corporate-tax basis (per ABS).
Flows into Xero via GK summary JE.
US 5471 side: see §4 depreciation rules.

5.E — Renfroe Innovation IP revenue (if any)¶

3 issued patents + 1 pending. No active licensing revenue documented.
Any future licensing revenue: recognize on accrual; characterize per §1235 / Lump-Sum-vs-Royalty advice from Conley Rose + Kim & Rosado.

6. FX convention¶

Use case	Convention	Source
Day-to-day Xero accrual entries (USD operating)	Native USD; no FX	n/a
Day-to-day Xero entries (multi-currency Wise/Brex)	Xero-applied rate at transaction date	Xero built-in
Intercompany settlement wires (USD↔MXN, USD↔JPY)	Wire-day FX rate from sending bank's statement	JPMorgan / Brex / Pinnacle / TSB
Month-end MXN balance translation (Santander → Xero summary JE)	Banxico published rate at month-end	Banxico TIIE / FIX
Month-end JPY balance translation (TSB → Xero summary JE)	BOJ published rate at month-end	BOJ
Annual GK basis translation (5471 / Form 8858)	Yearly average exchange rate per IRS	IRS Yearly Average
Mita basis (one-time)	JPY-anchored ¥835,355,900 paid to seller side; USD-equivalent computed at the wire-day rate of each contributing wire (see `accounting/mita-purchase-price-reconciliation.md`)	Wire confirmations

Provisional rule, pending Pearce review: JPY-anchored Mita basis with USD-equivalent computed wire-by-wire is the working basis. Some lenders / advisors prefer a single weighted-average rate for the entire acquisition. Confirm Pearce's preferred convention before any 5471 filing.

7. Personal-card reimbursement¶

When Austin uses a personal card for a business expense:

Record the expense in the period incurred, with the source coded to the appropriate Entity tracking + business-purpose memo.
Reimbursement is a cash event, not the recognition event — don't wait until reimbursed to book the expense.
Cadence: target monthly reimbursement; quarterly acceptable; annual-at-year-end is the worst case but workable.
Documentation requirement: receipt + business purpose memo.
One-off vs recurring: one-off purchases use the standard JE pattern; recurring (e.g., Austin's recurring AWS / SaaS subs paid on personal card) get a vendor-mapping rule for auto-categorization.
Backfill: historical pre-Brex / pre-policy purchases are reconciled on a one-time basis when discovered; do not retroactively reissue financials.

Workflow detail in accounting/personal-card-business-expenses.md. Structured subledger of pending reimbursements in (TBD — accounting/personal-card-reimbursement-register.csv if volume warrants).

8. Owner contribution / distribution¶

For Austin → RFH and Austin → any sub-LLC: - Cash in from Austin = capital contribution, equity (3010 Owner's Investment / 3110 in current Xero COA). - Cash out to Austin = owner distribution (3120 Owner's Draw). - Brex memo "OWNER CONTRIBUTION" is autogenerated; it is NOT legal classification. Verify the actual nature of each wire before posting. - Within the disregarded US stack (RFH ↔ each US sub-LLC): intercompany flows are capital contributions / distributions, NOT loans. Single taxpayer; no AFR, no interest, no tax event.

Real loan exception: AFR loan from Austin's parents (Eugene + Jana, joint) to Five Points BHM. This IS a real loan: §7872 imputed-interest compliance, AFR rate, 1099-INT issuance, written promissory note (note still missing per Stuart Memory follow-up). Tracked at accounting/afr-loan-amortization-template.md + the loan register at accounting/loan-register.csv.

Real loan exception (mirror leg): $350K Mita-side, parents → Austin → RFH, parallel structure. Same compliance posture.

All flows between Austin (personal) ↔ any RFH-stack entity must be documented per §8.
Flows between RFH ↔ RHG (Mexico): provisional collection-agent / settlement framing per §5.A. Once advisor sign-off lands, formalize via the intercompany services agreement (legal/intercompany-services-agreement-draft.md).
Flows between RFH ↔ GK (Japan): treasury / capital framing (legal/rfh-gk-treasury-framework-draft.md). Differs from RHG fact pattern.
Flows between Austin's separate S-corp (E.A. Renfroe & Company) ↔ any RFH-stack entity: arm's-length, separate-taxpayer treatment, document Augusta-rule rentals (W 3603) per §10 of tax/tax-strategies-reference.md.
Family member loans / gifts: separate taxpayer, real-loan or gift-tax-aware treatment per Pearce.

10. Crypto¶

Bitcoin retreat pattern (Dec 2025) is the only documented crypto activity to date.
Recognition: book USD-equivalent of received BTC at settlement-day rate; track BTC quantities + tax-lot basis at the crypto subledger (accounting/crypto-subledger.md).
Disposition: realized gain/loss in the period BTC is sold or spent. Tax-lot accounting: FIFO unless specifically identified.
Account split:
Coinbase (Personal) — Austin's personal wallet; out of scope for RFH Xero.
Coinbase (CM-historical) — historical CM crypto receipts pre-Apr 2026; subledger entries only.
Casa Moksha Coinbase (new, set up 2026-04-19) — in-scope going forward; should sync to RHG-side books per §5.A framing once finalized.

11. Lock-date policy (post-monthly close)¶

After monthly close completes (per the close runbook in xero-buildout.md §6.A), apply Xero's lock date at the close month-end.
Lock-date level: "All Users" (no user can post to locked periods, including Austin) — except via formal prior-period adjustment process.
Prior-period adjustment process:
Document the reason in writing
Get advisor sign-off if material (>$1,000 or >5% of P&L line)
Temporarily lift the lock date with logged justification
Post the JE
Re-apply the lock date
Document the adjustment in the close package retroactively

12. Materiality¶

Default materiality threshold: $1,000 per item, $5,000 cumulative per category, or 5% of relevant subtotal (whichever is lowest).
Above threshold: requires preparer + reviewer sign-off, cannot carry forward as unreconciled.
Below threshold: can carry forward up to 1 monthly close; must be resolved by next close.
Higher threshold for advisor-touch items ($10K) — these require advisor sign-off in the advisor decision register.

13. Tracking categories — strict rule¶

Two and only two tracking categories: - Entity (11 options, Renfroe Family Holdings + each sub-LLC + the two foreign-corp summaries + Renfroe Innovation) - Asset Class (7 options)

Do NOT add a third tracking category. Xero's manual-journal lines support a maximum of 2 tracking elements per line; a third dimension would silently break manual JE workflows.

When project / deal / matter metadata is needed beyond Entity + Asset Class: - Contact naming convention (e.g., "Conley Rose - Patent #4447") - Custom Xero reports filtering on contact / vendor - External subledgers (per §15) - Filenames in source-data/

14. Backup & disaster recovery¶

Daily Xero backup via scripts/fpa/xero_backup.py → committed to git in source-data/xero-backups/YYYY-MM-DD/.
Repo IS the primary backup — Gitea self-hosted at gitea.austinrenfroe.com.
Gitea-level backup: repo replicated to PBS (Proxmox Backup Server) on the homelab; nightly snapshots.
Encrypted offsite backup (MANDATORY — Phase 8 Governance): weekly rclone-encrypted snapshots of the Xero backup directory + the full Renfroe Holdings repo to a hosted blob (B2 / R2 — Austin picks). Encrypt with age or GPG; secrets backup separated from repo backup. Status: Austin action item per todo/austin-decision-board.md Block 5; not yet executed as of 2026-05-10.
Restore tests: quarterly — pull the most recent backup, parse via scripts/fpa/xero_diff_tenants.py (or similar), confirm schema continuity. Add to Phase 8 governance cadence.
Backup integrity: SHA256 checksums on the JSON backup files, committed alongside.
Secrets exclusion: tokens / API keys are never written to the repo (always to ~/.config/renfroe-fpa/ outside the working tree).
Access control review: Vaultwarden quarterly audit on Xero + Brex + JPMorgan + Plaid + bank-direct-feed credentials.

15. Subledgers (separate from Xero journals)¶

Some data should live in dedicated subledgers, not Xero's general ledger. The pattern: track the granular detail in a structured file, post summarized JEs into Xero. Subledgers as of 2026-05-10:

Subledger	File	Purpose
Reservations (Casa Moksha)	`accounting/reservation-ledger-casa-moksha.csv`	Per-guest revenue + STR avg-stay analysis
Intercompany	`accounting/intercompany-ledger.csv`	Cross-entity flows w/ FX, legal char, Xero JE ID
Loans	`accounting/loan-register.csv`	Real third-party + intrafamily debt
Property capex	`accounting/property-capex-register.csv`	Cap-vs-expense + depreciation source
Crypto	`accounting/crypto-subledger.md`	BTC tax-lot basis tracking
Personal-card reimbursements	`accounting/personal-card-business-expenses.md`	Personal-card-spend reimbursement workflow
Advisor decisions	`accounting/advisor-decision-register.md`	Per-advisor positions w/ effective dates

Each subledger has its own update cadence and reconciliation procedure.

16. Classification confidence system¶

Every transaction, JE, entity row, basis figure, and policy rule carries one of four confidence levels:

Level	Meaning	Treatment
Final	Advisor-confirmed; backed by primary source(s)	Post permanently; lock-date eligible
Provisional	Likely correct based on best-available inference; pending advisor confirmation	Post for management reporting; flag with `[PROVISIONAL — pending <advisor>]` inline
Unknown	Facts insufficient to classify	Hold in suspense; log in `accounting/exception-log.md`
Do not post	Out of Xero scope (personal, advisor work product, etc.)	Track in source repo / Monarch / advisor's records only

Implementation: - In Xero JE memos: prefix with [F], [P], [U] for the level - In the various subledger CSVs: a confidence or status column (some already use this — e.g., intercompany-ledger.csv legal_characterization=TBD) - In policy/decision documents: explicit "PROVISIONAL — pending " callouts - When advisor confirmation lands, upgrade [P] → [F] and log the upgrade in accounting/advisor-decision-register.md

Rule: Books may carry Provisional and Unknown items at any time, but the monthly close package must enumerate every non-Final item with its blocking advisor / question. No silent provisional. Audit-readiness depends on this.

17. Suspense accounts + exception log¶

For Unknown-level items that need a temporary home in Xero (so the trial balance ties out) plus an off-Xero record so they don't get lost:

Suspense accounts in COA (to be added in Phase 1 finalization):

1095 Cash clearing — unallocated wires — for incoming wires whose entity-of-record / characterization is TBD
2095 Suspense — unallocated AP — for vendor bills whose entity allocation is pending
5095 Suspense — uncategorized expense — for OpEx pending categorization
1180 RFH ↔ RHG collection clearing — collection-agent flows in motion
1185 RFH ↔ GK treasury clearing — capital + financing flows in motion
1190 Foreign summary JE clearing — temporary holding for in-process RHG/GK summary JEs being reviewed
1195 Crypto clearing — BTC in motion before settlement
1100 Reservation deposit clearing — Casa Moksha — guest deposits not yet recognized as revenue
2100 Refundable guest deposit liability — Casa Moksha
1199 Austin reimbursement clearing — pending personal-card reimbursements
1198 Intercompany clearing — disregarded stack

Exception log workflow:

When a transaction can't be classified at Final level, post to a suspense account with full memo (date, source, what's unknown, what we'd need to resolve)
Add a row to accounting/exception-log.md with: date opened, transaction reference, suspense account, blocking question, blocking party, target resolution date
Each monthly close: review every open exception. If unresolved beyond 3 months, escalate to Austin / advisor.
When resolved: post the reclassifying JE, mark the exception resolved with resolution date + reclassification rationale.

Rule: No item is force-fit into a final category just to clear reconciliation. A clean exception log is better than a clean-looking P&L that's silently wrong.

18. Xero go-live / cutover date¶

Locked decision (provisional, refresh when Phase 1 finalizes): The Xero org is already operational as of 2026-04-20 (Custom Connection live; Brex feed live; tracking categories installed; daily backups running). However, it has NOT yet had a "proper monthly close" run through it (Phase 5 of xero-buildout.md).

Cutover-date framework:

Pre-cutover (today): Xero is the management GL for current US-side activity, but Provisional confidence dominates and several load-bearing decisions await advisor input.
Cutover date = the first month-end after (a) Phase 1 COA finalization, (b) Pearce 2025 working session lands (or sufficient advisor confirmation on the §1 framing for RHG), © Phase 0 cleanup polish complete, (d) Brex 2024+ historical backfill done, (e) opening balances reconciled to external statements. Target: end of Q3 2026 (provisional).
Post-cutover: Xero becomes the canonical management GL with Final-confidence dominant. Provisional items remaining are explicitly flagged.

Backfill scope:

2024-2026 forward: full transaction-level detail via Brex CSV + Plaid + Amex direct.
Pre-2024: NOT full-backfill. Use opening balances per §6 source documents; rely on advisor / source-document records for any pre-2024 reconstruction needed for a specific tax position.

Rule: Don't full-backfill old messy years unless tax/advisor work specifically requires it. Use opening balances + clean forward reporting.

19. Document-retention architecture¶

For every material transaction, the source-document evidence has a canonical home. Xero may attach a copy where the API supports it, but the canonical home is OUTSIDE Xero.

Document type	Canonical storage	Linked to Xero?	Owner
Vendor invoice (US)	`source-data/<vendor>/` or Synology accounting folder	Yes — Xero attachment if material	Claude (filing)
Reservation contract	Synology `/SP (Moksha)/Guest Relations/`	Subledger ref only	Alex Snider
Wire confirmation	Synology `/Business/<entity>/` or `source-data/<bank>/`	Subledger ref only (intercompany ledger)	Claude
Advisor memo	`accounting/advisor-decision-register.md` + advisor's email archive	Subledger ref only	Claude
Mortgage statement	Synology `/Business/<property>/` + per-bank `banking/<bank>.md` ledger	Loan register ref	Claude
Property capex invoice	Synology `/Business/<property>/Capex/` + per-property capex inventory	Capex register ref	Claude
CFDI (Mexican e-invoice)	JME's CONTPAQ i + JME's package emails	NOT loaded into Xero (Mexican statutory side)	JME
Patent / trademark filing	Conley Rose firm files + repo `accounting/renfroe-innovation-historical-ip-spend.md`	Bill ref only	Conley Rose
Legal pleading / court order	Per-matter file in `legal/<matter>/` + counsel's archive	Bill ref only	Counsel
Tax return (filed)	Pearce's records + `tax/` (work copies) + Synology	NOT in Xero	Pearce
Brex transaction CSV	`source-data/brex/<period>-csv/`	Source for backfill, not Xero attachment	Claude
Bank statements	`source-data/<bank>/<period>/` on Synology	NOT in Xero	Austin (uploads) → Claude

Rule: Xero references evidence; it doesn't BECOME the evidence store. If Xero corrupts / migrates / disappears, the source-document archive remains intact.

20. Entity-allocation rules for shared expenses¶

Some expenses touch multiple entities. Default allocation rules:

Shared expense type	Default allocation	When to flag for review
Pearce general family-office tax work (not entity-specific)	RFH parent (acts as family-office cost center)	If a specific entity drives the work (e.g., 5471 prep for GK), allocate to that entity
Kim & Rosado international tax	RFH parent	Same exception
Conley Rose patent prosecution (Renfroe Innovation)	Renfroe Innovation	n/a
Conley Rose CASA MOKSHA trademark	RHG	n/a
Portilla Mexican legal	RHG	If a specific Cindy / LABORAL / corporate matter, can sub-tag in memo
Withers London personal	OUT OF SCOPE for RFH Xero	n/a — Austin's personal
Withers Tokyo GK formalities	RFH parent or GK depending on substance	If related to the proposed new-GK formation (not yet executed): RFH parent (proxy for the pre-formation entity); reallocate if/when the new GK is actually formed
Stuart Memory SBA work	Five Points BHM (where the SBA exposure sits)	n/a
Travel — Austin to Casa Moksha	RHG (if substantive RHG business) or out-of-scope (if mixed personal)	Always flag for review when mixed
Travel — Austin to Mita	RFH parent or GK depending on substance	Same
Software subscriptions used across entities (e.g., Xero, Brex platform fees, accounting tools)	RFH parent	n/a — RFH is the family-office cost center
Banking, admin, insurance	Per-entity if entity-specific (e.g., per-property insurance); RFH parent if family-office-wide	Always check — many policies bundle entities
Edgewood utility-passthrough on 1006	Five Points BHM	n/a — pure Five Points
Walter Scott Law / Skinner Legal property tax protest	Five Points BHM (where 1006 sits)	n/a

Rule: Default per the table; allocate at posting time. If unsure, post to RFH parent with a [ALLOC-REVIEW] flag in the memo, log to the exception register, and escalate at month-end. Avoid the failure mode of accumulating "Pearce - General" bills against RFH parent that should have been allocated to a specific entity for tax purposes.

21. Owner-vs-entity boundary rules¶

Eight common scenarios where Austin (personal) ↔ entity boundary is load-bearing. Locked treatment for each:

Scenario	Cash flow	Book treatment	Tax treatment
Austin pays personally for an RFH expense	Austin's personal cash → vendor	Dr Expense (entity); Cr Austin Reimbursement Clearing (1199). When reimbursed: Dr Austin Reimbursement Clearing; Cr Cash	No tax event at reimbursement (intra-disregarded); Austin doesn't deduct on personal return
RFH pays for an Austin personal expense	RFH cash → vendor (or vendor refunded later)	Dr Owner's Draw (3120); Cr Cash	Distribution to Austin; tracks against equity
RFH pays an RHG-attributable expense	RFH cash → vendor (e.g., Brex Primary 8798 → Portilla)	Dr Due to RHG (intercompany clearing 1180); Cr Cash. Then on RHG side: Dr Expense; Cr Due to RFH (mirror) — net result: RFH advanced cash on RHG's behalf, RHG owes RFH	Per accounting-policy.md §5.A — provisional; intra-disregarded for RFH side; cross-border for RHG side
RFH collects an RHG-attributable revenue	Guest pays → RFH (Brex CM Dep 3529)	Dr Cash; Cr Due to RHG. Then settlement wire reverses: Dr Due to RHG; Cr Cash	Provisional collection-agent framing per §5.A
Austin funds RHG directly (e.g., Austin → Santander MXN, no RFH leg)	Austin's personal cash → Santander MXN	Dr Cash (Santander); Cr Acreedor Gavon Augustus (per JME framing); on US side, no entry until consolidated 5471 prep	Acreedor framing per JME; not a capital contribution per JME's books; Pearce US-side framing TBD
Austin funds RFH directly	Austin's personal cash → RFH (Brex / JPMorgan)	Dr Cash; Cr Owner's Investment (3110)	Capital contribution to RFH (single-member, no tax event)
RFH funds GK	RFH cash → GK (via Brex 0593 conduit or Wire)	Dr Investment in GK (1810) [per Phase 1 COA when added]; Cr Cash. If a real loan: Dr Note receivable from GK (1820); Cr Cash	Capital contribution adds to GK basis for 5471. If a loan, real-debt characterization. Currently mixed — see loan register row `RFH-GK-Loan2` for the documented intercompany loan; the rest is treated as capital contribution, provisional
Austin funds GK directly (e.g., parents' $350K AFR loan via Austin → GK)	Austin's personal cash → GK	Dr Cash (on GK side); Cr Note payable to E+J Renfroe (parents' AFR loan) — Austin is intermediate conduit	Real loan from parents; Austin is conduit. Parents → Austin → GK has 1099-INT compliance per §7872

Rule: Always ask "which entity's books reflect this?" before posting. The Brex memo is NOT authoritative; the actual cash-flow path is. When the cash-flow path implies a different treatment than the memo, document the override in the JE memo and link to source evidence.

Rule (mirror): Every intercompany flow has TWO sides. If you post one side, post or queue the mirror immediately. The intercompany ledger (accounting/intercompany-ledger.csv) is the master.

22. Multiple basis types¶

For properties and foreign entities, several basis schedules coexist and serve different purposes. Don't conflate them.

Basis type	Purpose	Source of truth
Book basis	Management reporting in Xero	Xero fixed-asset records
US tax basis	Schedule E / 5471 / 8865 / 8858 / depreciation under US §168	Pearce's records; this repo's `accounting/<property>-purchase-price-reconciliation.md` for inputs
Local statutory / tax basis	Mexican or Japanese corporate tax	JME (RHG) / ABS (GK)
Cash invested	Cumulative cash-out by Austin / RFH for the property	Intercompany ledger + bank statements
Debt basis (for §752 / §1.752 partnership purposes if relevant; or just cumulative outstanding debt)	Per-property debt outstanding + amortization	Loan register + bank statements
FX-adjusted basis	USD-equivalent basis at a given date for FX-translation in 5471 / 8858	Per acct policy §6 FX convention

For Mita Garden Hills specifically: - Book basis (Xero): ¥835.36M JPY-anchored (post-Pearce finalization), USD-equivalent computed wire-by-wire (~$5.65M-$5.7M range). See accounting/mita-purchase-price-reconciliation.md. - US tax basis (Pearce): same JPY-anchored ¥835.36M, with US-side Land/Building allocation TBD per Pearce. - Local Japanese statutory basis (ABS): per Japanese corporate depreciation rules. - Cash invested: cumulative across the two seller wires + closing fees + acquisition tax (~$5.65M-equivalent). - Debt basis: ¥780M TSB mortgage + $350K parents' AFR loan = ~$5.58M USD-equivalent at disbursement-day FX. - FX-adjusted basis (annual): per IRS yearly average rate.

Rule: Some basis schedules live OUTSIDE Xero. Don't try to reproduce in Xero what Pearce / ABS / JME maintains separately. Cross- reference, don't duplicate.

23. Manual until 2-3 clean closes¶

The following areas should remain MANUAL (preparer keys in, reviewer signs off, no automated posting) until 2-3 consecutive clean monthly closes have been completed:

Foreign summary JEs (RHG and GK)
Intercompany classification (legal characterization on each cross-entity flow)
Personal-vs-business reimbursement decisions
Casa Moksha revenue recognition (per provisional §5.A framing)
Crypto (any disposition or mixed-currency settlement)
New entity onboarding (any flow involving a freshly-formed entity before its books are stable)
Large legal / accounting invoices (>$10K threshold; require per-bill review for entity allocation per §20)
Property purchase / sale / refinancing (one-time, high-stakes, document-intensive)
8832 elections / classification changes
Cap-table changes (new member, share assignment, redemption)

Rule: Automation comes after stability, not before. A wrong auto-post on any of these takes weeks to unwind and may corrupt advisor work product downstream.

24. Contact naming convention¶

Standardized contact names in Xero. Use the legal name where one exists; consistent capitalization and punctuation.

Bad	Better
AMEX	American Express
Brex Card	Brex Inc.
Pearce	Pearce, Bevill, Leesburg, Moore P. C.
JME	JME Contadores
Austin Reimbursement	Austin Renfroe — Reimbursements
Casa Moksha	Casa Moksha — Guest Revenue

For entities owned within the stack, use the legal name + a short parenthetical role: - Renfroe Hospitality Group SA de CV (CM operator) - Renfroe Holdings GK — existing (Mita owner pre-restructure) - Renfroe Holdings GK — new (forming) - Casa Moksha LLC (US TX, pre-activation)

For revenue contacts (guests via reservation ledger), use: - <Guest legal name> — <Reservation ID or date range>

Rule: Contact chaos destroys reporting. One canonical name per counterparty.

25. Account naming + numbering convention¶

Five-digit account codes, range-grouped:

Range	Category
1000–1099	Cash + cash equivalents (per-entity sub-ledger pattern)
1100–1199	Clearing accounts (suspense, intercompany, reservation deposits, crypto, reimbursement)
1200–1299	Intercompany receivables (Due-from-X)
1300–1499	Other current assets (AR, prepaid, recoverable IVA)
1500–1799	Fixed assets (real estate basis per property; FF&E; marina lease rights)
1800–1899	Investment in subsidiaries / notes receivable (intercompany loans)
1900–1999	Other long-term assets
2000–2099	Current liabilities (AP, accrued)
2100–2199	Refundable deposits liabilities (guest deposits, security deposits)
2200–2299	Long-term debt (mortgages, AFR notes payable; intercompany payables 2300+)
2300–2399	Intercompany payables (Due-to-X)
2400–2599	Other long-term liabilities
3000–3999	Equity (per-entity owner contribution / draw / retained earnings; SBA distribution sub-line)
4000–4999	Revenue (4010 Hospitality, 4100 Real estate rental, 4200 Marina sublicense, 4300 Other income)
5000–5999	Direct property / hospitality COGS (booking platform fees, payment processor fees, agent commissions, crypto disposition, guest-direct cost)
6000–6499	Property operating (R&M, utilities, insurance, mortgage interest by property, property tax)
6500–6699	Mexican payroll / taxes (RHG-side, via summary JE: salaries, IMSS, ISN, aguinaldo, prima vacacional, severance, IVA payroll lines)
6700–6899	G&A (banking fees, software subs, dues, meals, travel)
6900–6999	Bad debt + other operating losses
7000–7099	Depreciation + amortization
7100–7299	Professional fees BY NATURE (Round 4 LLM refinement — was BY FIRM; firms now go in Xero Contacts, matters in JE memo): 7110 Accounting / tax advisory; 7120 Legal — US; 7130 Legal — Mexico; 7140 Legal — Japan / international; 7150 IP / patent / trademark; 7160 SBA / debt workout advisory; 7170 Property tax protest; 7180 Family office consulting; 7190 Other professional fees
7300–7999	Other expenses (catch-all; minimize use)
8000–8199	FX gain/loss (8100 Bank revaluations; 8150 Unrealized FX; 8200 Realized FX; 8201 PayPal fees)
8200–8499	Crypto gain/loss (separate from FX)
9000–9999	OCI / tax-only / adjustment / suspense (use minimally)

Rule: New accounts must fit into this scheme. If the 5-digit code needs explanation in the COA, the scheme needs revision before adding the account. Avoid creating per-entity duplicate P&L accounts where the Entity tracking category can already segregate.

Professional-fee discipline (Round 4 LLM refinement): - Account = nature (e.g., 7120 Legal — US) - Contact = firm (e.g., contact "Pearce, Bevill, Leesburg, Moore P. C." for accounting/tax — 7110) - Tracking = entity / Reporting Unit (allocates the fee to the right entity per accounting/accounting-policy.md §20) - Matter / engagement = JE memo or contact-name suffix (e.g., contact "Conley Rose - Patent #4447" for Renfroe Innovation patent prosecution — 7150)

This avoids the COA becoming a vendor list. A firm working across multiple natures (e.g., Withers does both Tokyo GK formalities = 7140 and London personal work = OUT OF SCOPE for RFH Xero) is bookable to the right account by nature, with the firm in Contacts.

26. Clearing accounts — explicit list¶

Required clearing accounts (Phase 1 finalization deliverable):

1095 Cash clearing — unallocated wires
1100 Reservation deposit clearing — Casa Moksha
1180 RFH ↔ RHG collection clearing
1185 RFH ↔ GK treasury clearing
1190 Foreign summary JE clearing — RHG
1191 Foreign summary JE clearing — GK
1195 Crypto clearing
1198 Intercompany clearing — disregarded stack
1199 Austin reimbursement clearing
2100 Refundable guest deposit liability — Casa Moksha
5095 Suspense — uncategorized expense
9099 Suspense — adjustment

Rule: Each clearing account has a target zero balance at month-end (except liability ones like 2100 which carry as long as deposits are held). Non-zero clearing balances at month-end MUST be enumerated in the close package with explanation.

27. Evidence + rationale + uncertainty preservation¶

For every material cleanup / reclassification entry posted to Xero (threshold: $1,000 or any item touching a foreign entity / intercompany flow / personal boundary):

The Xero JE memo must include: 1. Source evidence reference (path on Synology / repo file / Brex API descriptor / advisor email) 2. Classification rationale (one-sentence "why this entity / why this account / why this period") 3. Confidence level ([F], [P], or [U], per §16)

If the JE is reversing or correcting a prior posting, also include: 4. Original posting reference (Xero JE ID being adjusted) 5. Why the original was wrong

Rule: No transaction gets cleaned up unless the system preserves the original evidence, the classification rationale, and the advisor uncertainty level. This is the single most important discipline rule for a family office with foreign entities, real estate, intercompany flows, personal overlap, and tax-sensitive structures. The biggest failure mode is books that LOOK clean but are silently wrong; this rule ensures we can always trace back what we believed and why.

28. Decision hierarchy for source conflicts¶

When two sources disagree on a fact, resolve in this priority order:

Executed legal documents (signed agreements, deeds, court orders, notarized instruments)
Filed tax returns / statutory filings (1040, 5471, BOIR, MX SAT annual return, JP corporate return — what's actually on file with the authority)
Signed financial statements (JME signed FS, ABS-prepared GK statutory FS, audited statements)
Bank statements / wire confirmations (the physical movement of money)
Advisor written opinions (Pearce / JME / ABS / Portilla / Withers / Stuart Memory written deliverables)
Austin direct correction (override over LLM inference; flag any conflict between Austin's direct statement and 1-5 in context/contradictions.md)
Email-thread inference (mining of M365 / Gmail; treat as evidence, not authority)
Prior LLM inference (lowest priority)

Rule: Austin direct correction (level 6) overrides LLM inference (level 8) silently. But if Austin's direct correction conflicts with levels 1-5, DO NOT silently override — log the conflict in context/contradictions.md and surface it explicitly. (Austin himself may have inherited a wrong understanding from prior records; the conflict needs to be resolved deliberately, not collapsed.)

29. Reporting Unit vs Legal Entity (clarification of §13)¶

The Xero "Entity" tracking dimension is functionally a Reporting Unit, not always a legal-entity statement. Most options ARE legal entities (RFH, the disregarded sub-LLCs, the foreign corps, Renfroe Innovation), but W 3603 (primary residence, personally held) and Oceana 433 (Mexican fideicomiso, personally held) are reporting-unit-only — they appear in management views for consolidated wealth visibility but no operational P&L flows through them.

Implication: When reading a Xero report filtered by Entity = W 3603 or Oceana 433, treat the figures as Reporting Unit summary data, not as legal-entity books. For tax-prep purposes (Pearce's 1040 preparation), W 3603 is Schedule A homestead and Oceana 433 is Schedule E (if rented) / personal asset (if not) — reflected on Austin's 1040 directly, NOT on the disregarded-stack consolidation.

Reporting Units that ARE legal entities: RFH, W 3101 Holdings, ATX Marine Holdings, Austin Marine Holdings, Renfroe Marine Holdings, Five Points BHM, Renfroe Hospitality Group (= RHG SA de CV in Mexico, includes the post-conversion Casa Moksha LLC pair), Renfroe Holdings GK existing (currently the only GK), Renfroe Holdings GK proposed-second (pre-formation; not yet executed as of 2026-05-10), Renfroe Innovation.

Reporting Units that are NOT legal entities: W 3603, Oceana 433, Consolidation Eliminations.

This split is documented in accounting/entity-tax-classification-matrix.md and context/contradictions.md CON-04.

30. Stable external IDs for source transactions¶

Every imported source transaction carries a durable external ID in the format:

SOURCE-SYSTEM|ACCOUNT|DATE|AMOUNT|NATIVE-ID

Examples:

BREX|PRIMARY-8798|2025-12-15|300000.00|brex_txn_abc123
JPM|OPERATING|2025-04-24|4620000.00|jpm_wire_20250424_001
COINBASE-CM|BTC|2025-12-21|0.12345678|coinbase_txn_xyz
SANTANDER-MXN|65-XXXXXXXX-9|2025-09-24|300000.00|santander_mxn_wire_001
PLAID|<account-id>|<date>|<amount>|<plaid-transaction-id>

Storage: - In the Xero JE Reference field - In the corresponding subledger row - In the migration manifest if posted via script - In the exception log if unresolved

Rule: Every Xero write carries this external ID as an idempotency key. Re-running the same import script does NOT double-post; the script checks for the external ID first and skips if found.

31. M365 + automation security¶

Hard identity-level least-privilege for the M365 + Vaultwarden + Brex + Plaid + Xero + JPMorgan + bank-direct-feed credential surface. Per context/contradictions.md CON-05:

M365 read-only Azure app: separate registration with read-only delegated permissions. Used for all script-driven mining. Currently the read-only-ness is enforced at script level (scripts/inboxes/m365.py only requests read scopes), but the underlying app is consented for read/write — soft control. Plan: Austin to create a true read-only app registration at next Azure-side session.
M365 write-capable app (only if needed): separate registration
separate Vaultwarden item. Currently NOT created (no automation needs M365 writes). If a future workflow requires writes, this is the path; do NOT widen the read-only app's scopes.
Read logs: every mailbox / file read by an automation should log the fact, the script, and the timestamp.
Identity separation: never let the same automation identity both mine sensitive legal email AND post accounting changes. Right now this is irrelevant (no automation writes accounting changes triggered by mail mining), but as the system grows, hold the separation.

Same posture for Brex / JPMorgan / Plaid / Xero / bank-direct-feed: - Read-only credentials wherever the workflow allows - Write-capable credentials only for the specific scripts that need them - Vaultwarden items separated by capability (read vs write) - Quarterly access-control audit per accounting/accounting-policy.md §14

32. Xero-mutation discipline¶

Every Xero-mutating script produces a migration package. Required by xero_migrations/README.md. Required components:

Dry-run mode — produces a CSV of intended changes without calling Xero write APIs
Pre-flight snapshot — scripts/fpa/xero_backup.py BEFORE any write, committed to source-data/xero-backups/<date>/
Idempotency keys — stable external IDs per §30
Draft-first — new ManualJournals / Bills created as DRAFT; diff surfaced; Austin approval; promote to AUTHORISED / POSTED
Post-flight snapshot — second xero_backup.py AFTER, also committed
Rollback plan — written, realistic
Lock-date guard — script aborts if it tries to write into a locked period (per §11)

Rule: Pre-existing pre-2026-05-10 Xero changes (Moksha rollup, tracking-category install, IVA rates, Portilla merge, Brex dupe cleanup) are not retroactively packaged. New migrations from 2026-05-10 forward MUST follow this discipline.

32a. Plaid → Python → Xero pipeline guardrails¶

Before the Plaid pipeline goes live for any non-Amex card:

These are pre-conditions. The pipeline does NOT go to production until all checked.

33. Reporting views (consolidation + tax-support)¶

Five named reporting views. Each Xero export / generated report declares which view it represents. Per accounting/xero-buildout.md §6.A:

View	Name	Purpose
Operating	US Operating View	RFH parent + US disregarded stack only; matches what the Brex feed gives us natively
Management	Austin Consolidated Management View	US + foreign summaries + personal-business assets where relevant; consolidated for management decision-making
Foreign summary	Foreign Corp Summary View	RHG/GK local-book summaries flowed in via summary JEs
Tax support	US Tax Support View	Pearce-focused: Schedule E, 5471, 8858, FBAR, NOL, Subpart F, GILTI inputs
Legal entity	Legal Entity View	Only true legal owners; no informal Reporting Units (drops W 3603 + Oceana 433 + Consolidation Eliminations)

Implementation: No third tracking category in Xero (per §13). Use Xero's report templates + filters + markdown frontmatter (reporting_view: field) in generated reports.

Rule: Every advisor export package (per accounting/xero-buildout.md §6.B) declares which view its figures come from. No view-mixing in a single advisor package.

34. Consolidation eliminations¶

When the same flow is recorded on both sides of an intercompany relationship, consolidated reports double-count without explicit elimination entries. Per the new "Consolidation Eliminations" Reporting Unit (planned Phase 0 addition):

Elimination JE templates:

Elimination	Why	Frequency
RFH "Investment in GK" (1810) vs GK equity (3010 / per GK summary JE)	Avoid double-counting GK equity on the consolidated balance sheet	At month-end consolidation
RFH "Due to RHG" (2300) vs RHG "Due from RFH" (1200)	Net out intercompany payable / receivable	Monthly
RFH "Due to GK" (2300+) vs GK "Due from RFH"	Same	Monthly
Internal service fees (if intercompany services agreement gets a fee structure)	Eliminate the intercompany expense / revenue	Per JE
Owner contribution (3110) on receiving entity vs Owner draw (3120) on sending entity for any sub-LLC ↔ Austin pair	Normalize to a single owner equity view	Monthly
"Austin personal conduit" reconstruction flows (e.g., parents → Austin → RFH → GK chain for AFR loans)	Show the AFR loan as a single liability not a chain	Per setup

Mechanic: Each elimination is a manual JE posted under Entity = "Consolidation Eliminations" with offsetting Dr/Cr matching the gross entries on the contributing entities. Consolidation reports filter to exclude — or include — Consolidation Eliminations depending on view (per §33).

35. Refined clearing accounts vs intercompany balances¶

Updates §11 (lock-date) + §17 (suspense) + §26 (clearing accounts).

Account type	Expected month-end balance	SLA	Example
Suspense / transit clearing	Zero or exception	Resolve next close	1095 Cash clearing — unallocated wires
Reservation deposit clearing	Can carry substantiated balance (deposits not yet recognized as revenue)	Per booking lifecycle	1100 Reservation deposit clearing — Casa Moksha
Refundable guest deposit liability	Can carry; substantiated by booking ledger	Per booking	2100 Refundable guest deposit liability — Casa Moksha
Intercompany clearing — disregarded stack	Zero at month-end (these are capital contributions / distributions, not loans)	Always zero	1198
RFH ↔ RHG collection clearing	Can carry substantiated balance pending settlement	Per intercompany ledger; recon monthly	1180
RFH ↔ GK treasury clearing	Same	Same	1185
Foreign summary JE clearing	Zero after summary JE posts	Resolves at quarter-end (Path A cadence)	1190, 1191
Crypto clearing	Zero between settlement events	Per disposition	1195
Austin reimbursement clearing	Zero after monthly reimbursement	Monthly	1199
Suspense — uncategorized expense	Zero or exception	Resolve next close	5095

Rule: A non-zero balance in a "should be zero" clearing account at month-end is a CONTROL FAILURE — investigate, document, resolve. A non-zero balance in a "can carry substantiated" account is normal — must reconcile to a subledger or contract.

36. Exception severity + SLA¶

Updates §17 (exception log workflow) with severity tiers:

Severity	Example	SLA
Critical	Tax classification (8832 / PFIC); foreign-entity transfer (proposed new-GK restructure if it executes); legal dispute (Cindy proceedings); large unidentified wire	7-14 days
Major	Unknown wire; missing AFR promissory note; large unallocated AP bill	30 days
Minor	Rounding gap; vendor naming inconsistency; small counterparty ID	Next monthly close
Parking lot	Non-blocking historical research (e.g., pre-2024 Brex CSV gap-fill)	Quarterly review

Rule: Every exception log entry has a severity. Critical-severity items go to Austin within 24 hours of opening. Major-severity get escalated at the weekly hygiene-pass review. Minor + parking-lot are covered at monthly close + quarterly review respectively.

37. Automated tests (test list — implementations follow)¶

Build these checks into the close runbook. Initially manual; build into CI / scripted as the system matures:

Every Xero transaction has Entity tracking
Every P&L transaction has Asset Class tracking unless explicitly exempt (per a documented exemption list)
No bank account has Type = BANK if its underlying nature is debt (mortgages, AFR loans, intercompany payables)
No transaction sits in Uncategorized after monthly close
No transaction posts to locked periods (per §11)
No foreign summary JE lacks [LOCAL-SUMMARY], [INTERCO-CLEAR], or [US-TAX-ADJ] JE-type tag
No material transaction (>$1,000 or any cross-entity / cross-border) lacks source-document reference per §27
No advisor-gated issue is marked Final without a corresponding entry in accounting/advisor-decision-register.md
No personal card remains in Xero unless mapped to a reimbursement workflow per §7
No "loan" exists in Xero without a matching accounting/loan-register.csv row
No reservation revenue exists in Xero without a matching accounting/reservation-ledger-casa-moksha.csv row
No capex entry exists in Xero without a matching accounting/property-capex-register.csv row
No intercompany balance carries forward without matching accounting/intercompany-ledger.csv rows
Stable external IDs (per §30) are unique across Xero — no duplicates
Every clearing account meets its expected month-end posture per §35
No professional fee over the materiality threshold (per §12; default $1,000) is posted without explicit Entity tracking + an entity-allocation rule per §20

Initial implementation: Manual checklist, run at each monthly close (per accounting/xero-buildout.md §6.A Day 3). Future: scripts/fpa/xero_close_tests.py runs all 15 against the live Xero state + the subledgers; outputs pass/fail report.

38. Book-to-tax bridge (replacing M-1/M-3 language)¶

The book-to-tax bridge is the worksheet Pearce maintains that reconciles book-basis amounts (per Xero) to tax-basis amounts (per the 1040 / 5471). The previous policy memo §1 referred to "M-3/Schedule M-1." Generic "book-to-tax bridge" is correct unless Pearce specifies which specific schedule (M-1 / M-3 / 5471 Schedule H / etc.) he prefers.

Rule: Refer to it as "book-to-tax bridge" in the policy memo and in any general documentation. Pearce determines which schedules / forms it actually maps to per filing.

39. Provisional sections — what's still open¶

These rules above are flagged provisional and depend on specific advisor confirmations:

§5.A — RHG revenue recognition framing (waiting on JME §1 answer + Pearce sign-off)
§4 — GK depreciation method, start date, 168(k) eligibility (waiting on Pearce + ABS)
§6 — Mita FX-translation convention (waiting on Pearce)
§10 — Crypto tax-lot accounting (FIFO default; waiting on Pearce to confirm vs specific-identification election)

Do not harden these without sign-off. When they harden, update this file inline + log in accounting/advisor-decision-register.md.

Last updated: 2026-05-10. Refresh whenever a policy changes. Maintain by treating this file as canonical — if a rule is documented elsewhere, it should also be reflected here.