Optimizing the Asset Life Cycle Entry 5 – The Balance Sheet

At a minimum, the following data elements should be accurately recorded and maintained:

  • A unique means to identify each asset, such as a manufacturer Serial Number or an affixed Asset Tag Number
  • Costs- both Purchase and Installed Costs
  • Depreciation– current and accumulated
  • Useful Life
  • Location and/or Custodian of the asset

In order to better understand the importance of each of these information elements, a brief explanation concerning their primary role and impact on managing risk is necessary.

To place this into perspective, let’s understand how the FAR can impact financial reporting. Most companies produce what is known as a “balance sheet”.  The balance sheet represents a snapshot of a company’s financial condition.

A balance sheet, therefore, is important when it comes to a myriad of things including; acquisition, applying for credit, and in the case of publicly traded entities, the balance sheet has a direct correlation to stock value.

A balance sheet must reflect, among other things, the value of capitalized assets. Accordingly, accuracy is important.

Quite often, FAR entries are flawed in that they reflect assets that are no longer in existence, reflect duplicate entries, or may be altogether missing entries for assets that should capitalized and depreciated. So as we explore the two business practices (from entry #3 – purchasing and shipping/receiving) in the life cycle, we will place emphasis on these data elements and the means to verify and adjust the FAR.

Leave a Comment

Comment (required)

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Name (required)
Email (required)