Newsletter - Do you have an accurate Fixed Asset Register?

The above question is extremely important for several reasons but probably the most important reason from a legal point of view is that having a Fixed Asset Register (FAR) is a statutory requirement of the Companies Act and one of the areas external auditors MUST and DO focus on.
Agulhas Utilities Corporation recognized that a lot of businesses are unaware of the importance and benefits of having an accurate Fixed Asset Register. Companies also neglect or struggle to maintain their Asset Registers for several different reasons, such as: shortness of staff, untrained staff, improper processes, etc., or simply do not know what an Asset Register should contain and how it should be maintained.

Thus, the purpose of this newsletter is to:

Inform you, the reader, of the importance and benefits of having an accurate Fixed Asset Register.
Introduce a new service that Agulhas Utilities Corporation are now providing to its clients to help them build and maintain accurate Fixed Asset Registers. In addition, we also provide consultation on associated processes and the physical tagging of fixed assets.

Before looking at all advantages and important reasons for having an accurate Fixed Asset Register, let’s first look at how the dictionary defines Fixed Assets and Fixed Asset Register:

Fixed Assets are those such as land, machines, office equipment, buildings, as well as intangible assets such as patents, trademarks, copyrights, etc. held for the purpose of production of goods or rendering of services and are not held for the purpose of sale in the ordinary course of business.
Fixed Asset Register is a statement of an organization which shows the assets that it owns. The register allows a business owner to quickly retrieve information on an asset including its description, purchase date, location, purchase price, accumulated depreciation, and estimated salvage value.

Benefits and importance of having an Asset Register:

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.

Agulhas Utilities Corporation devised the following 10 simple questions to assist you in recognizing if your current Asset Register and markings on physical assets are satisfactory or in need of improving. Each question requires only a simple YES or NO for an answer:

Does the description or classification of any asset record within your Asset Register immediately tell you what it is? In other words, are your assets properly and accurately described and classified according to a standard method of describing and classification? This is CRUCIAL in order to establish accurate reporting and KPI management of your assets!
Are your tangible assets marked/labelled with unique numbers/codes that are identical to the coding of the same assets within your Asset Register? In other words, can you instantly search and find the correct asset record for a unique physical asset within the Asset Register?
Are the markings/labels on your assets of the best quality and long-lasting for their operating environments?
Do the markings/labels also include barcodes, QR (Quick Response Codes) or RFID (Radio Frequency Identification) to enable easy/automatic reading by means of mobile devices? If yes, are these mobile devices integrated with the computerized system that contains your Asset Register? This technology hugely simplifies inventory checks of physical assets and makes it possible to carry out such checks/inspections more frequently.
Are you able to trace any asset within your Asset Register to its exact (or most probable) physical location?
Do you have an accurate Item Catalog that contains clear images of every type of asset in your Asset Register? And can every asset within your Asset Register be easily mapped to its classified item within the Item Catalog?
Does your Asset Register indicate the true and current condition/state of your physical assets?
Does your Asset Register indicate the true depreciated values of your physical assets and does it incorporate the most appropriate depreciation method for every type of asset?
Do you have a process for quickly and effectively doing inventory checks or inspections of your physical assets on a scheduled basis in terms of its current state/condition and physical location?
If you answered yes to question 9 above, is the audit conducted frequently enough in order to make your Asset Register reliable and satisfactory for external auditors….and yourself?