Asset Maintenance – Tagging & Physical Verification

Asset Maintenance – Tagging & Physical Verification

Most organizations need to deal with hundreds or even thousands of physical assets. In such a case, it’s important to know the operating condition and location of the assets owned by them at periodical intervals. Identifying, tracking, and controlling assets are a critical step in ‘Asset Maintenance’.

Tracking of available physical assets such as furniture and fixtures, plant and machinery, IT assets, etc. and compare with Fixed Asset Register. The process of tracking is performed by proper tagging of the assets using bar-code or such other human-readable numbers. To generate various reports and take corrective action

Tagging of Fixed Assets

Once the asset is procured/ placed in service, the organization affixes asset tags with descriptive information such as asset number, expenditure code, asset description, cost center, and a bar code.

Tagging Best Practices:

  • Affix temporary ID at the time of physical listing
  • Create a permanent ID for matched assets after the matching process using the system asset number.
  • Permanent ID will be printed on flexible labels like a bar-coded sticker, metal plates, etc. that will conform to the asset, which will also withstand harsh conditions including chemicals, abrasion, solvents and high temperatures.
  • The label used shall ensure easy tracking, accurate and reliable reads for the years to come.
  • Size and type of label shall be decided depending on the nature of the asset
  • Approved size and type of label shall be affixed on the matched assets
  • Update Cost center, Location, Machine serial number, part number, etc in System
  • Update Inventory particulars in System for future reference
  • Ensure authenticity in depreciation calculation for income tax and companies act purposes
  • Correct valuations for each location insurance purposes
  • Suggest modifications in Standard operating procedure for capitalization, transfer, and disposal of the asset so as to ensure on line updating in System
Asset Maintenance – Tagging & Physical Verification

Physical Verification:

All entities conduct a physical count of all fixed assets at periodic intervals (ranging from 1 to 5 years) to verify actual assets in hand and value and ensure the accuracy of related financial records. PV of assets helps in identifying obsolete, abandoned and unused assets, control capital expenditure, obtain confirmation letters from the third parties, and support for corrective action on unmatched assets.

1. Unmatched assets

  1. Available physically but not found in the asset register
  2. Available in asset register not found physically

Reason for discrepancy identified

  1. Not possible to verify
  2. Physically discarded/disposed of not removed in the asset register
  3. Low-value assets
  4. Assets available with third parties

2. Idle Asset Review: 

Organizations make efforts to make full utilization of fixed assets in their possession and control. Hence they must make efforts to identify and make available idle, excess, and underutilized equipment to other departments that may need them.

Post Verification Adjustments

A. Impairment:

Impairment exists when the carrying amount of a fixed asset exceeds its fair value and is non-recoverable. Specific events/changes could trigger an impairment of an asset like a significant decrease in the market price of a fixed asset, a change in how the company uses an asset or changes in the business climate that could affect the asset’s value.

B. Asset Adjustments:

Adjustments to existing asset information are often needed to be made. Events may occur that can change the depreciable basis of an asset like there may be improvements or repairs made to assets that either add value to the asset or extend its economic life. Expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is included in the gross book value, e.g., an increase in capacity.

C. Asset Revaluation:

The purpose of a revaluation is to bring into the books the fair market value of fixed assets. Events may occur that can lead the organization to revalue its assets for change in asset value due to inflation, deflation, or appreciation.

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Creation Date Saturday, 01 August 2020 Hits 1798

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