Quick IFRS Compliance with Fixed Asset Verification and Management
Tracking assets is an important concern of every company, regardless of size. Many organizations face a significant challenge to track the location, quantity, condition, and maintenance and depreciation status of their fixed assets. STPL’s comprehensive approach cleanses and fortifies the fixed asset register to establish a strong foundation for effective fixed asset management. These services provide the necessary data visibility to identify operational savings in many areas and avoid the risk of non-compliance with financial, tax and regulatory issues.[sociallocker id=”507″]
While STPL’s fixed asset management services will assist you in meeting external audit and regulatory standards, it can also be extremely beneficial in meeting your firm’s capital budgeting, financial and risk management reporting requirements.
STPL’s approach includes a complete physical inspection of the facility in order to reconcile assets to the fixed asset register. All assets are tagged with bar codes to coincide with the fixed asset register, which ensures more accurate accounting activity. The approach adopted by STPL while rendering fixed assets management services includes –
- Assessment of FAR (Fixed Assets Register) & Accounting Records
- Physical Verification & Tagging of Assets
- Reconciliation of Physical Verification Report with FAR
- Discussion of Discrepancies & Sign-off
- Updation of FAR
Nigerian Companies Act on Fixed Asset Register
The Industrial Inspectorate Act (Cap 180 Laws of the Federation of Nigeria (LFN)), requires a company to support its fixed assets acquired in any financial year worth N500,000 or more, with a Certificate of Addition of Fixed Assets (CAFA). This certificate will be issued by the Inspectorate Division of the Federal Ministry of Industries. The Federal Inland Revenue Service is empowered to withdraw; capital allowances claimed on such fixed assets where there is no acceptance certificates to support them. This places certain fixed assets regulatory compliance requirements on companies. It also necessitates among other things, the need for a systematic recording and tagging of a company’s fixed assets that a tie into its fixed asset register, enhance maintenance, secure the assets and foster theft deterrence.
IFRS- International Financial Reporting Standards
AS 16 Property, Plant and Equipment outlines the accounting treatment for most types of property, plant and equipment. Property, plant and equipment is initially measured at its cost, subsequently measured either using a cost or revaluation model, and depreciated so that its depreciable amount is allocated on a systematic basis over its useful life.
IAS 16 was reissued in December 2003 and applies to annual periods beginning on or after 1 January 2005.
Indian Companies Act on Fixed Asset Accounting
The Council of the Institute of Chartered Accountants of India has issued Accounting Standard (AS) 6 on ‘Depreciation Accounting’. This standard lays down general principles of accounting for depreciation applicable to all entities. As such, the Standard is applicable to companies also in matters where there are no specific requirements under the Companies Act. AS 6 also provides that the statute governing an enterprise may provide the basis for computation of depreciation. In such a situation, the requirements of the statute have to be complied with. Thus, in case of companies, section 205 and 350 of the Companies Act, 1956, which govern provisions regarding charge of depreciation for the purpose of payment of dividends and computation of managerial remuneration, respectively, provide the basis for computation of depreciation. The Companies (Amendment) Act, 1988, has amended section 350, as a consequence to which rates of depreciation prescribed in Income-tax Act, 1961, and the Rules made thereunder are no more relevant as the aforesaid section now provides that the rates of depreciation applicable would be those prescribed in Schedule XIV, which has been inserted in the Act. This Guidance Note on Accounting for Depreciation in Companies is issued by the Research Committee in the context of the aforesaid sections of the Act as well as the Accounting Standard.
Business Control and Visibility
Apart from regulatory and accounting needs, organizations gain a substantial advantage when they have an accurate visibility and control over their physical assets. It reduces fraud and theft, provides improved decision making on buying and selling of assets, improves management, movement and allocation of assets, and helps is timely reuse of assets, thereby substantially reducing overheads.
Critical Risk Mitigation
Risk from fire, theft, and breakage of physical assets can be substantially reduced by insuring them. General Insurance companies would subsequently conduct a physical asset verification of fixed assets, do a current valuation and then provide the premium amount to mitigate risk.
Organization planning to conduct a one time or periodic Fixed Asset Verification can choose to outsource this activity to competent organizations like STPL. Following are immediate benefits of outsourcing the service:
- Avoid hiring of additional and redundant staff to conduct the verification internally, thereby reducing fixed expenses on employee costs.
- Avoid tampering with Fixed Asset records if done internally, thereby minimizing chances of fraud.
- Reduce cost of verification by outsourcing to service companies with mature processes and practice.
Contact STPL for More Details.