Asset Management: Fixed Asset Register

Types of Assets

Assets are classified in several ways for control purposes. High-value assets, such as vehicles and generators, are recorded individually and tightly controlled, while low-value assets, such as staplers, may be recorded in groups or expensed. Durable assets last for more than a year, such as furniture and machinery, while non-durable assets, such as stationery and cleaning materials, are used up quickly and treated as consumables.

Storage, Receiving and Recording Policies

The storage policy sets out where and how assets are kept safe, such as locked stores, secure parking and protection from damp and fire. The receiving procedures set out how new assets are checked and accepted. The recording policy requires every asset to be given an asset number or tag and entered in the fixed asset register with its description, serial number, location, cost, date of purchase, supplier, user, useful life and depreciation method.

Issuing and Transfer Policies

The issuing procedures require an authorised requisition before an asset is issued to a user, who signs to accept responsibility for it. The transfer policy requires a transfer form, approved by both the releasing and the receiving departments, whenever an asset moves, so that the register always shows its correct location and custodian.

The Fixed Asset Register

A fixed asset register is a detailed record of all the non-current assets owned by the organisation. It supports the totals in the ledger accounts, helps physical verification, records depreciation, and provides information for insurance, maintenance and replacement. An extract is shown below.

Receiving Procedures

The receiving officer follows these steps:

Check the copy order

Compare the delivery with the copy of the purchase order to confirm that the goods were actually ordered and authorised.

Check the delivery note

Confirm that the supplier's delivery note matches what has arrived and what was ordered.

Physically inspect the goods

Open and examine the goods in the presence of the delivery person where possible.

Check the quality, quantity and specifications

Confirm that the goods are of the right quality, the correct number, and meet the specifications such as model, size and serial numbers.

Report breakages and spoiled items

Note any damage or shortages on the delivery note before signing, and report them to the supplier and the buyer.

Complete the GRN

Prepare a goods received note recording what was actually received in good condition.

Pass the GRN for payment

Send the GRN to the accounts section, where it is matched with the order and the supplier's invoice so that only goods actually received are paid for.

Assessing the Asset

The decision is based on physical verification of the asset's condition, its functionality (whether it still does the job), its performance history from the asset register files, such as breakdowns and repair costs, and its remaining useful life. Repair quotations are obtained and the cost of repairs and maintenance is compared with the disposal value and the cost of a replacement. If repairs would cost more than the asset is worth or would only extend its life briefly, disposal is recommended.

Here you are deciding whether it is cheaper to repair an old asset or to get rid of it and replace it. Compare what the repair will cost with what the asset could be sold for, how many more years the repair will give, and what a replacement would cost each year. If the repair costs more than the asset is worth or buys very little extra life, recommend disposal; otherwise recommend repair. Below, we show you how it is done, step by step.

Board of Survey and Authorisation

A board of survey is a committee of officers, independent of the user department, appointed to inspect assets proposed for disposal, confirm their condition and value, and recommend the method of disposal. Its report is submitted for authorisation of disposal by the officer or body with the authority to approve it, such as the finance director or the board. No asset may be disposed of without this written authority.

Methods of Disposal

Approved assets are disposed of by auction or tender, to get the best price openly; donation, such as giving old computers to a school; destruction, for items that are unsafe, contain confidential data or have no value, such as hard drives; and demolition, in the case of buildings. The method, the proceeds and the date are recorded.

Steps in Updating the Register

Write off the disposal by marking the asset as disposed, with the date, method and authority. Review the disposal value by comparing the proceeds with the net book value to find the profit or loss on disposal. Update the asset register by removing the asset from the active list. Update depreciation, charging depreciation up to the date of disposal if the policy requires it. Determine the net book value (NBV), which is cost less accumulated depreciation, for remaining assets. Update the asset schedule, the summary of cost, depreciation and NBV by class of asset, which supports the statement of financial position.

Here you are finding whether the business made a profit or a loss when it sold an asset. First find the net book value, which is the cost minus all the depreciation charged so far. Then compare it with the money received: if the proceeds are more than the NBV, there is a profit on disposal; if they are less, there is a loss. Below, we show you how it is done, step by step.

The Disposal Account

In the ledger, the cost and accumulated depreciation are transferred to a disposal account, together with the proceeds, and the balance is the loss or profit on disposal.