Fixed Asset Internal control and internal control is a very critical element; the Sarbanes-Oxley rules of the Foreign Corrupt Practices Act both require a periodic determination that the assets that are on your balance sheet are, in fact, their internal control.
Fixed Asset Record
Therefore, it means a periodic inventory of your fixed assets. There are two ways to take such an inventory.
The first is to take a printout of your fixed assets and try to find the assets.
So you either go from the fixed asset register to the floor or go from the bottom to the fixed asset.
If you have a reasonably good fixed asset record with accurate descriptions and faith that most of the assets are there,
you’re better off going from the fixed asset record printout to the floor.
So, if you have a barcode system, you can take the barcode reader and try and identify it.
If you have not had a barcode system and your record is not very good, it may pay you to, in effect, start over again and determine.
What are the assets, in effect, recreate the fixed asset register?
You probably will end up with fewer line items than you have now, but you’re going to be able to do the current fair market value.
if you do a complete physical inventory again using.
As I recommend it, a pretty high cutoff point of $2,500 or $5,000 for the minimum capitalization level.
if you create a new fixed asset record system with what’s out there and can estimate the fair market value of the assets.
You’re going to create a new register that can be approximately the same dollar amount as the old one even though.
there are significant errors in the old record regarding the initial setup, whichever is the most accessible record to assets or assets records.
We recommend having a barcode identification on each significant piece of equipment over twenty-five hundred dollars or five thousand dollars.
Fixed Asset Inventory
You can then take that inventory once every year or once every two years and make any necessary adjustments.
The reason that fixed asset records get out of whack the record doesn’t reflect.
What’s there is that a lot of managers do not follow the company’s rules for tax reports asset acquisitions to transfers and deletions.
The paperwork requirements to maintain a fixed asset management system are relatively simple if the people do the job that they’re responsible for
Manager In A Factory Transfers
if a manager in a factory transfers a significant piece of equipment to another Factory and the company may be halfway around the country and doesn’t tell anybody in the accounting department.
that that piece of equipment moved. Then wanted to take it when it comes time to take the physical inventory you won’t find that asset and it’ll be what’s called a ghost asset obviously
It’s offset by an asset now at a new location that isn’t on the books,
and this is why maintaining the integrity of the asset system through proper reporting is critical the way.
that you try to motivate managers to follow the vat rules to communicate asset changes.
the best way to do it is to have them be responsible for the assets under their control.
I mean that at the beginning of the year, you give each supervisor or manager department head director,
whatever the title is, a printout, so here are the assets that you are responsible for. We will take an inventory and asset inventory at the end of the year.
If any of the assets are missing the charge, you will charge your P&L for the missing assets.
It’s incredible how people suddenly get religion and start reporting the changes, particularly any transferred assets.
because they don’t want to get charged for that. So there, you know the scene all is true that the receiving Department.
Software Fixed Asset System
Now, if they’ve got the paperwork correctly done, they will ask that it will now appear on the receiving Department’s printout at the end of the year.
So it’ll be there, and there will be no there’ll be no missing assets so that internal control of fixed assets requires both a sound software system and discipline within the company that managers do what they supposed to and that can do.
Fixed Asset Register Example
There are industries, asset register examples like public utilities or railroads, where the rate of return allowed is a function of the assets they have, and they keep excellent assets. Government contractors own excellent asset records.
Because they’re going to get reimbursed by the government for the depreciation on their assets. There are industries where good.
Fixed asset records are just a way of life. But, still, for companies that don’t have that kind of internal financial motivation directly.
You have to create that sense of responsibility, and requires a sound software system and the discipline to enforce the rules.
Sarbanes-Oxley rules
The Sarbanes-Oxley rules of the Foreign Corrupt Practices Act both require a periodic determination
that the assets on your balance sheet are their internal control,
which means a periodic inventory of your fixed assets.
- There are two ways to take such an inventory. The first is to take a printout of your fixed assets and try to find the assets. Wherever they are, presumably, the fixed asset record will have a location. So you go to that location.
- The alternative way is to go and look at the assets in a particular area. Record a description of those assets, and then find them in the fixed asset register to either go from the fixed asset register to the floor or go from the bottom to the fixed asset.
- If you have a reasonably good fixed asset record with accurate descriptions and faith, most of the assets are there.
- You’re better off going from the fixed asset record printout to the floor.
- When you have a barcode system, you can take the barcode reader and try and identify it.
- However, if you have not had a barcode system and your record is not very good, it may pay you to start over again and determine.
Conclusion
Wherever they are, presumably, the fixed asset record will have a location. You go to that location; the alternative way is to go and look at the assets in a particular location, record a description of those assets and then try and find them in the fixed asset register.
