The significance of the aforementioned question is multifaceted, but from a legal perspective, the paramount reason is that maintaining a Fixed Asset Register (FAR) is a statutory obligation under the Companies Act, and it is a critical area of scrutiny for external auditors.
Importance and Benefits of Fixed Asset Register
Agulhas Utilities Corporation has acknowledged that many businesses do not realize the significance and advantages of maintaining an accurate Fixed Asset Register. Companies often overlook or find it challenging to keep their Asset Registers up-to-date due to various factors, including staff shortages, lack of trained personnel, inadequate processes, and a lack of understanding about the contents and maintenance of an Asset Register.
Purpose of this Newsletter
This communication serves to highlight the significance and advantages of maintaining an accurate Fixed Asset Register. Additionally, it introduces a novel service provided by Agulhas Utilities Corporation, which assists clients in establishing and preserving precise Fixed Asset Registers. This service extends to consultations on related processes and the physical labeling of fixed assets. Before delving into the myriad benefits and crucial reasons for keeping an accurate Fixed Asset Register, it is essential to understand the definitions of Fixed Assets and a Fixed Asset Register as per the dictionary:
Fixed Assets are long-term tangible pieces of property or equipment that a firm owns and uses in its operations to generate income, such as land, machinery, office equipment, and buildings, as well as intangible assets like patents, trademarks, and copyrights, which are not intended for sale in the regular course of business.
A Fixed Asset Register is a detailed listing maintained by an organization that catalogs all the assets it possesses. This register enables a business owner to swiftly access details about an asset, including its description, date of acquisition, location, initial cost, accumulated depreciation, and anticipated residual value.
Benefits and Importance
- Compliance with government legislation according to the Companies Act.
- Keeping track of whether or not assets are still in possession or are working.
- Keeping track of the value of your assets, which allows for computation of depreciation and for tax and insurance purposes.
- Helpful for business management purposes, by producing accurate reports and KPIs.
- Ensuring control and preventing misappropriation of assets.
- Assisting the Maintenance Management Strategy of the assets.
State of Asset Register
Agulhas Utilities Corporation has formulated 10 straightforward questions to help you determine if your current Asset Register and the markings on physical assets are adequate or require improvement. Each question can be answered with a simple YES or NO:
- Does the description or classification in your Asset Register clearly identify each asset? Are your assets properly and accurately described and classified according to a standardized method? Accurate descriptions and classifications are vital for precise reporting and KPI management of your assets.
- Are your tangible assets marked/labelled with unique numbers/codes that match the codes in your Asset Register? Can you quickly locate the corresponding asset record for any physical asset in the Asset Register?
- Are the markings/labels on your assets high-quality and durable for their operating environments?
- Do the markings/labels include barcodes, QR codes, or RFID for easy/automatic scanning with mobile devices? If so, are these devices integrated with the system housing your Asset Register? This integration greatly facilitates inventory checks and frequent inspections of physical assets.
- Can you pinpoint the exact or most probable physical location of any asset listed in your Asset Register?
- Is there a precise Item Catalog with clear images for every asset type in your Asset Register? Can each asset be easily linked to its classified item in the Item Catalog?
- Does your Asset Register accurately reflect the current condition of your physical assets?
- Does your Asset Register show the true depreciated values of your physical assets and include the most appropriate depreciation methods?
If you have answered ‘NO’ to more than two of the preceding ten questions, it is likely that your Asset Register does not meet a satisfactory standard, or your physical assets are not adequately tagged.
For further details on any topic covered in this newsletter or to inquire more about our services, please reach out to Agulhas Utilities Corporation.
“No one has a greater asset for his business than a man’s pride in his work”
– Mary Parker Follet
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