Fixed Assets Management

Fixed asset management is vital because it prevents "ghost assets," reduces maintenance costs, and ensures accurate financial reporting. By tracking asset lifecycles, businesses can minimize equipment downtime, avoid overpaying on taxes and insurance, and make informed decisions about when to repair or replace critical infrastructure.

The fixed asset lifecycle consists of four primary stages: acquisition, depreciation, maintenance, and disposal. First, the asset is purchased or built. Next, its value is systematically reduced over time through depreciation. Regular maintenance follows to extend its life, ending with disposal when the asset is sold or scrapped.

It improves accuracy by ensuring that the Fixed Asset Register (FAR) matches physical reality. Accurate tracking prevents errors in depreciation calculations and balance sheet valuations. This provides a "single source of truth" for auditors, ensuring compliance with accounting standards like IFRS and GAAP.

A Fixed Asset Register is a centralized database containing detailed information about every long-term asset a company owns. It typically includes the purchase date, cost, location, current user, depreciation method, and maintenance history. A well-maintained FAR is essential for audits, insurance claims, and internal tracking.

Common challenges include manual data entry errors, lack of real-time visibility, and "ghost assets" (items in books but not physically present). Many organizations also struggle with inconsistent tagging, complex depreciation rules across different regions, and failing to track assets that move between multiple office locations.

Fixed assets are long-term tangible items (like buildings or machinery) used to generate income over multiple years. They are not intended for immediate sale. Current assets, such as cash or inventory, are expected to be converted into cash or used up within one fiscal year.

Proactive maintenance tracking allows companies to schedule repairs before a total breakdown occurs. By documenting service history, businesses can identify recurring issues and optimize performance. This preventive approach reduces long-term capital expenditure by delaying the need for expensive new replacements.

Ghost assets are items recorded in accounting books that are missing, broken, or sold. They pose a financial risk because companies continue to pay property taxes and insurance premiums on them. Regularly auditing assets helps remove these entries, leading to immediate cost savings.

The straight-line method is the most common. It spreads the cost of an asset evenly over its estimated useful life. Other methods include the double-declining balance and units of production, which are used when assets lose value faster in early years or based on usage.

Yes. While fixed assets are usually physical (tangible), intellectual property like patents, trademarks, and copyrights are considered "intangible fixed assets." They are managed through amortization rather than depreciation but are still tracked for their long-term value to the business.

Most experts recommend a full physical audit at least once a year. However, high-value or mobile assets (like laptops and specialized tools) should be audited quarterly to prevent loss and ensure the Fixed Asset Register remains accurate for year-end financial reporting.