When it comes to managing fixed assets, conducting a periodic fixed asset roll is crucial for maintaining accurate financial records and ensuring a solid balance sheet.
In this article, we will explore the concept of fixed asset rolls, discuss their importance, and provide you with valuable tips for achieving best practices in fixed asset roll processes. By implementing these tips, you can enhance the accuracy of your balance sheet and optimize your asset management efforts.
What Is a Fixed Asset Roll?
A fixed asset roll refers to the process of physically verifying and reconciling the fixed assets of an organization with the corresponding records in the accounting system. It involves conducting a thorough inventory check to ensure the existence, accuracy, and completeness of fixed assets. By comparing physical assets with the accounting records, a fixed asset roll provides a reliable snapshot of an organization’s asset holdings.
The Importance of Fixed Asset Roll
A comprehensive fixed asset roll ensures the reliability of financial statements by reconciling physical assets with the accounting records. It helps prevent misstatements and provides stakeholders with a clear picture of the organization’s asset value.
Properly maintained fixed asset records through regular rolls ensure compliance with accounting standards and facilitate smoother audits. By verifying the existence and condition of fixed assets, organizations can identify idle, obsolete, or underutilized assets, leading to better cost control and optimization of resources.
Accurate fixed asset records assist in evaluating insurance coverage and managing risks associated with assets. A thorough roll can help identify any discrepancies or gaps in coverage.
Tips for Best Practices in Fixed Asset Roll
Develop a well-defined fixed asset roll process that outlines roles, responsibilities, and timelines for conducting the roll. This ensures consistency and accountability. Perform fixed asset rolls at least annually or whenever significant changes occur, such as acquisitions, disposals, or relocations.
Ensure Physical Verification
Physically inspect and verify each fixed asset to confirm its existence, location, condition, and proper identification (asset tags, serial numbers, etc.).
Update Asset Records Immediately record any changes identified during the roll, such as disposals, additions, transfers, or revaluations. Keep asset information accurate and up to date.
If any discrepancies are found between physical assets and accounting records, document them thoroughly. Investigate and resolve discrepancies promptly to maintain accurate records.
When a new facility is under construction but not yet operational in a given accounting period, it is advisable to categorize it as “construction in progress” in a separate column. Depreciation should not be applied to this asset until it is actively in use.
It is essential to consider the useful life and asset class of each asset and accurately record depreciation expenses in the roll forward. While this advice may seem obvious, it addresses common issues that often affect roll forwards and balance sheets. For instance, when acquiring a new building, it is more logical and appropriate to apply a straight-line depreciation method over its 30-year useful life rather than a shorter period like five years. In summary, maintain a logical and organized approach, adhere to the GAAP depreciation guidelines outlined in ASC 360, and ensure compliance with auditing requirements for a smoother process.
A well-executed fixed asset roll is vital for maintaining accurate financial records, complying with regulations, and optimizing asset management. By following the best practices outlined in this article, you can enhance the reliability of your balance sheet, minimize risks, and maximize the value of your fixed assets. Remember, a thorough and regular fixed asset roll is an investment that pays off in improved financial reporting, cost control, and overall organizational efficiency.