In order to identify the classes of expensed/non-capitalized assets to be tracked and included within an asset management program, you must establish a set of criteria.
For example, assets that contain confidential information need to be controlled. Assets susceptible to theft or misplacement warrant inclusion as well. In some cases an asset is constructed from multiple components.
A construction-in-process (CIP) asset is an asset you construct over a period of time. Since a CIP asset is not yet in use, it does not depreciate and is only in the corporate book. When you finish building the CIP asset, you can place it in service and begin depreciating it. Consequently, asset management should include CIP assets from start to finish.
Asset management must also emphasis standards. Standards ensure alignment and help to reduce confusion. Standards also help to avoid introducing mistakes.
For example, improvements or alterations can be made to an existing capitalized asset over time. A common mistake is to capitalize the improvement separately. This can produce irreconcilable differences during physical inventory/verification activities. When improvements or alterations made to an existing asset justify capitalization, such additions should be made to the cost of the original asset. Doing so may also increase the useful life of that asset.
[latest_posts header=”Latest Posts” limit=”6″ category=””]