Tracking and managing assets is an important and usually daunting task for an organization, regardless of size. Fixed assets can be defined as property that a firm owns and uses in the production of its income. Examples of fixed assets include, but are not limited to, computers, tools, software, and office equipment.
A company may have a policy to capitalize (depreciate) only those assets which cost more than a specified amount. All equipment whose value is below the determined capitalization limit or which have a useful life of less than one year is expensed.
A fixed asset register (FAR), which is maintained by finance, is used to keep track of capitalized fixed assets and their value. FAR entries allows for the computation of asset depreciation and for tax and insurance reporting. In some cases, a FAR must be kept in order to be in compliance with legislation governing public companies.
In a large corporation, the task of identifying and locating a specific fixed asset can be difficult unless numbering is systematic. A common problem in most companies is the improper maintenance of the FAR and the inability to uniquely identify and locate assets listed on the FAR. Physical verification (reconciliation) of fixed assets becomes a futile exercise unless the FAR is properly maintained.
It is advisable to use a systematic numbering technique to identify fixed assets. The process of numbering fixed assets is called asset tagging. The purpose of tagging assets is to uniquely identify one asset from another as well as to track movement of assets from one place to another place. Tagging assets also provides a common ground for communications between finance who maintain the FAR and end-users.