What is a ‘Fixed Asset’ ?
A fixed asset is a long-term tangible piece of property that an organization owns and uses in the production of its income and is not expected to be consumed or convert into cash any sooner than at least one year’s time. Fixed assets are sometimes collectively referred to as “plant.”
Examples of Fixed Assets
The following are examples of general categories of fixed assets:
• Computer equipment
• Furniture and fixtures
• Intangible assets
Importance of Fixed Assets
Information about organization’s assets helps in creating accurate financial reporting, business valuation and thorough financial analysis. Investors use these reports to determine a company’s financial health and decide whether to buy shares in or lend money to the business. Because a company may use a range of accepted methods for recording, depreciating and disposing of its assets, analysts need to study the notes on the corporation’s financial statements to find out how the numbers were determined.
Fixed assets often comprise a significant portion of the total assets of an enterprise, and therefore are important in the presentation of financial position. Furthermore, the determination of whether expenditure represents an asset or an expense can have a material effect on an enterprise’s results of operations. There are definite measures taken by every organization to manage these assets effectively.
Fixed Asset Management
Fixed assets management is an accounting activity that deals with tracking & managing of fixed assets throughout their lifecycle.
Fixed Assets Life Cycle
Efficient management of fixed assets increases the productivity. One can achieve this by implementing various asset related activities with utmost care. These activities include asset acquisition, asset transfer both internal & external, asset componentization, asset category, consumables tracking, service maintenance, timely service, AMC/CMC of assets. It also deals with tracking insurance premiums, dates and vendors. Fixed assets tracking is another crucial activity of fixed assets management.
Fixed Assets Tracking
Organizations face a significant challenge to track the location, quantity, condition, assignee, and audit details of their fixed assets. A popular approach to track fixed assets uses serial numbered asset tags, which are labels often with bar codes or QR codes for easy and accurate reading. The user can track the assets with a barcode / QR code reader and then produce a report.
Asset tracking software like Tracet automates the Fixed Assets Tracking process by integrating barcode / QR code scanners and printers. They also generate reports as and whenever required.
Fixed Assets Depreciation
Fixed assets lose value as they age. Because they provide long-term income, these assets are expensed differently than other items. Fixed assets are subject to periodic depreciation and a certain amount of the asset’s costs is expensed annually. The asset’s value decreases along with its depreciation amount on the company’s balance sheet. The organization can then match the asset’s cost with its long-term value. Organizations need to maintain certain standard while performing depreciation. In India, depreciation is calculated as per standards mentioned in Companies Act 2013, Income Tax Act or IFRS standards.
It is important for every organization to maintain a proper track and manage fixed assets periodically. Tracet – Comprehensive Fixed Asset Management Solution is helping organizations to effectively track, optimally manage fixed assets and comply with all statutory governances including IFRS standards, Companies Act 2013 etc. Tracet is a web based solution available in both on-cloud & on-premise variants. Tracet also offers complete fixed assets auditing services. Physical verification and detailed fixed asset auditing services are also available.