Most organizations face significant challenges related to tracking the location, quantity, condition, maintenance and the depreciation status of their fixed assets. Typically fixed assets are recorded and maintained in either a spreadsheet or a fixed asset register (FAR). These records are then periodically verified through audit activities, such as physical inventory.
In order to verify fixed asset records, entries must contain useful identifying information and must align with standard financial reporting rules. The first step that Verasset representatives undertake when preparing to conduct a physical inventory and reconciliation for a client is to analyze their fixed asset records.
Common problems that Verasset encounters during this stage include entries with:
- Vague descriptions such as; “computers” or “chairs”
- Lack of any unique numbering such as a serial number or asset tag number
- No linkage to physical documents such as an invoice or purchase order
- Bundled capitalized items
- Bundled expense items
- Improvements made to an asset that are capitalized separately from the asset itself
In some situations, we also find that a company maintains multiple FAR’s. Often this is done to represent assets located and used in different geographic regions. However, during review it is not uncommon to find duplicate asset entries across these records. This is usually as a result of the transfer of an asset from one location to another without applying the appropriate updates to both records sources. In addition to double-counting the same asset, inaccurate asset locations can have property tax implications.
These are just a few of the problems we encounter. By performing a thorough line-by-line review and categorization, problems can be identified, isolated and either resolved or scheduled for more intensive actions. The analysis also helps to guide our clients towards the refinement, or reinforcement of internal policies.