Controls
➢ Asset verification ➢ Asset valuation ➢ Acquisition and
disposal authorities
Measures
➢ Number of assets maintained
➢ Cost of department
➢ Elapsed time to record asset
£7
10 percentile Median
£151 90 percentile
Cost drivers
➢ Complexity of assets ➢ Number of assets on register ➢ Number of asset movements ➢ Complexity of depreciation policies ➢ Complexity of authorisation procedures ➢ Range of data held ➢ Number of users of data range Source: Statistics taken from Benchmarking database: 21 February 1997
➢ Revaluation of features and mass transfers of assets to new cost centres
➢ CIP linked to capital project accounting
➢ Effective tax management integrated with the fixed assets system
➢ Forecast asset depreciation for budget purposes
➢ Variable depreciation rules for classes of assets
➢ Assets can be grouped for depreciation rules
➢ Complete asset reports by physical location and cost centre
basis
Fixed Assets
Objectives
➢ To maintain a complete register of all the organisation’s fixed assets which reflects location, age, current values, associated cost centres
➢ BU responsibility for ownership
PwC175
6
Fixed Assets - Critical Success Factors
These are a summary of the key business requirements, which must be met to achieve the objectives. ➢ Asset accounting policies clearly documented ➢ Appropriate coding by asset category established ➢ Authority levels clearly defined ➢ Procedures surrounding Fixed Asset process are documented and communicated to staff ➢ Budgets in place for capital expenditure ➢ All existing assets identified and classified ➢ Staff trained in FA process and have clear roles and responsibilities ➢ Statutory and tax requirements understood ➢ FA calendar in place and communicated to staff ➢ Standing data set up on the system reflecting asset accounting policies ➢ Ability to model depreciation scenario
basis based on book value and
➢ Apply depreciation rules to asset high risk
classes
➢ Comprehensive asset
➢ Depreciation rates in management accounts in line with statutory rates
Median
10 percentile
Fixed Assets processing time
1 day
14 days
40 days
10 percentile
Median
90 percentile
PwC175
Fixed Assets cost per Business Unit FTE (in £s) £31
Fixed Assets - Trends
From
➢ Separate fixed assets module ➢ Lack of asset ownership ➢ Cost of asset usage not attributed to product ➢ Performed by Finance Department
➢ Acquisition linked to purchase order and accounts payable ledger
➢ Depreciation charged
➢ Variable asset valuation
automatically to cost centres in mechanisms eg historic, current
PwC175
3
Fixed Assets - Best Practice Features
Maintain fixed asset register
Control acquisitions and disposals
Manage periodic asset depreciation
Verify and value asset accounting
➢ Asset ownership devolved to business unit level
Processes
➢ Maintain asset register ➢ Acquisitions and
disposals ➢ Depreciation charge ➢ Verifying asset base ➢ Maintaining of valuation
Process Features
➢ Determine asset categories for internal and statutory purposes
➢ Monitor asset maintenance charges
➢ Apply insurance valuation to key assets
GL
replacement
➢ Cost code validation with GL ➢ Disposals linked to sales ledger
➢ Automatic links to AP and Project Accounting system to capture acquisitions
requisition proposals
Information Systems
➢ Asset ledgers integrated with GL and AP
➢ Depreciation and project control by cost centre
➢ Automated depreciation calculation
verification on regular periodic or rolling basis where asset cannot be verified via technical assumptions (most telco’s do
➢ Links asset depreciation to production and product costs/development
➢ Ensure asset responsibility at BU level
➢ Identify asset usage
➢ Set up appropriate control of asset acquisition and disposals across company
➢ Report on acquisitions and disposals on a monthly basis
Best Practice Financial Processes: Fixed Assets
Fixed Assets - Best Practice Objectives
Organisation
➢ Asset recording integrated with maintenance and non financial data
➢ To calculate depreciation consistently with financial reporting requirements
➢ To optimise replacement policies ➢ To minimise ownership costs