When drafting company policies related to fixed asset accounting, you should be sure to address every step of the fixed asset life cycle, from purchase planning and actual purchase to the retirement and disposal of the asset once its depreciation has been completed and it has reached the end of its useful life.
Here are some specific aspects to consider:
The purchase of fixed assets is a long-term investment that can often be expensive. Because of this, a system of checks and balances needs to be set up to ensure that all related expenditures are timely and necessary.
A typical fixed asset approval process involves a letter that includes information about why the purchase is required, as well as cost estimates from several different manufacturers and a comprehensive breakdown of differences between product options.
The majority of fixed assets come with a manufacturer’s warranty that should be provided to any employees using your company’s assets for the purpose of maintaining warranty compliance. It is recommended that you keep warranty information pertaining to all of the fixed assets held by your company in an easily accessible yet secure central location.
Barcode asset tracking
To facilitate inventory tracking efforts, your company may wish to take advantage of barcode labels. This will be helpful if you maintain a large number of the same types of fixed assets, such as computers, vehicles or other equipment. Using inventory barcode scanners and an inventory software program can help your company keep closer tabs on fixed asset movement. These solutions are especially useful with regard to assets that move from place to place a lot – for example, portable scanning equipment in hospitals.
Fixed asset management software
Because fixed assets have a useful life of more than one year, their cost must undergo depreciation over the course of their lifespan. The depreciation calculation process can get complicated, and leveraging depreciation software can help your company keep things straight.
Fixed asset retirement
When it comes time to retire a fixed asset, it is imperative that this is reflected on the books to avoid the occurrence of ghost assets – fixed assets that can’t be located despite appearing in your company’s logs. Ghost assets can sometimes comprise as much as 15 percent of a company’s total property, plant and equipment, and can lead to your organization appearing older on paper than it really is.