Fixed Asset Management: The Main Concepts

Thanks to the process approach, it is possible to manage the entire life cycle of a fixed asset: acquisition planning, purchase or creation, commissioning, inspection, maintenance, repairs, disposal and liquidation.

To do this, there is a class of tasks for maintenance and repair (MRO), or rather, the management of fixed assets (physical assets), Enterprise Asset Management.

Fixed assets are part of the company’s assets and by their nature have a positive economic value. Indeed, it should be remembered that the balance sheet reflects, at a given time, the situation of the company and that it consists of assets and liabilities. Among the assets, a distinction is made between fixed assets, i.e. accounting fixed assets, and current assets.

The management of fixed assets corresponds to the management of all the assets of a structure (company, association, community, etc.). This article, therefore, takes up the main definitions encountered in fixed asset management.

fixed asset management companies in India

What is an asset in asset management?

In fixed asset management, an asset is a set of goods or rights constituting an asset. The balance sheet includes fixed assets (goods remaining in the portfolio for a long time (more than 1 year) and current assets (goods temporarily remaining in the portfolio). Current assets correspond to stocks (raw materials, goods), receivables and investment securities.

The different concepts of fixed assets

According to fixed asset management companies, an accounting asset is a property, arrangement or acquired right which is property of the entity (administration, association or company). It will also remain in the heritage for over a year. The accounting fixed assets include the fixed assets at the balance sheet level. They are divided into 3 categories: intangible assets, tangible assets, financial assets.

In addition, a fixed asset in progress is a tangible or intangible asset that is not generally completed at the year-end date. It is most often formed by grouping invoices that arrive with a time lag. These are often complex assets, constructions or works for which there is a significant gap between the first costs incurred and commissioning.

Also, fixed production refers to fixed assets created by the entity itself. The fixed value then corresponds to the production cost consisting of the cost of purchasing raw materials, study costs, labour, etc.

Immobilization or charge?

The criteria for differentiating between a fixed asset and an expense related to the acquisition value and the period of use. It also remains less than a year in the heritage of the entity. It is often a consumable.

Asset and component management

A component is a subset of an asset, the amount of which must be significant. As told by fixed asset management companies in India, its useful life must also be different from the other components of this same active ingredient. Accounting does not define a specific threshold.

By use, a component corresponds to at least 20 – 25% of the total value of the asset. The useful life corresponds to the duration of use of the asset in the context of the entity’s operation. In addition, the breakdown into components only occurs on assets of significant value (constructions, complex industrial assets, etc.).

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