Fixed Asset Register (FAR) construction

Fixed asset register contains the list of all the fixed assets a business owns. The purpose behind maintaining is to keep track of book value of assets and depreciation. It can be equally used to maintain identification of each asset which can serve the purpose at the time of fixed asset verification. You can find the details like its date of purchase, cost, purchase date, salvage value, depreciation rates, its specifications etc.

• Comply with statutory requirements.

• Track and identify the asset.

• Security of the Asset specifically to prevent theft.

• Calculate Depreciation annually.

• Track Gross Book Value and Net Value of Assets.

• Assists in Conducting Audit of Assets and Asset Verification.

• Helps in estimating the repairs and maintenance cost.

• Assists in estimating the future capital investment in fixed assets.

• In certain countries, subsidies are allowed on certain assets. The value of assets is determined from fixed asset registers.

• Determining business valuations.

There is no fixed format or template for maintaining fixed asset register. The extent of details depends on the requirement of the management.  There is some primary list of things which should be maintained when maintaining this register is as follows:

• Serial number: It will show the count of entries.

• Identification: The unique identification code can be mentioned here.

• Name of the asset: Short name of the asset.

• Description: The description of the asset. It is a free field and can be updated in any details.

• Purchase date: Date on which the asset is purchased. It is normally invoice date.

• Purchase cost of the asset: The cost is also mentioned as per the invoice. Other expenses related to erection or installation can also be added to the purchase cost and maintain here.

• Date when it is put to use: Date on which the asset is put to use. This detail has relevance for high value assets normally machines whose purchase date and put to use dates are quite distant.

• Depreciation Method, Depreciation Rate, and amount of Depreciation arrived by applying the depreciation rate is mentioned here.

• Gross Book Value and Net Book Value after deducting the depreciation and the expected salvage value of the machine if it is to be sold after its life of use.

• Inaccurate physical verification of assets

• Depreciation could be allocated to the wrong company/cost center/department/division

• Depreciation could be misstated resulting in over or under payment of taxes

• Missing assets (potential theft problem) could go undetected

• The audit trail of transferred assets can be lost

• Assets could be under or over insured

• Exposure to accounting audit write-up

An organization can avoid these risks by implementing formal physical audit policies and procedures along with a supported asset tracking system which will help control and manage the fixed asset register.