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How to perform fixed asset reconciliation

In general, how does a company perform fixed asset reconciliation. I know for other BS account (i.e. prepaid or accrual account), we usually download all the GL activities and sum them by activity nature and then tie it to some kind of supporting documents.

How does it work for fixed asset reconciliation? Do you pull all fixed asset payment support to validate the gross value of asset and show the depreciation calculation to prove the net asset value is reasonable?

Answers

Rachel Miller
Title: Director of Finance
Company: Larimer Humane Society
(Director of Finance, Larimer Humane Society) |

Hello! At my current organization, we have a fixed asset module within our software (Financial Edge), so I am able to pull a report at any time that lists each asset's cost, accumulated depreciation and current book value. I tie this out to my balance sheet every month, and I also keep a separate up-to-date record in Excel that has more detail that my managers need, particularly for audits (location, user, etc.).

My previous employer's software did not have a fixed asset module, so I created a similar Excel spreadsheet with every record and then tied that out to the GL balances each month. At year end, the auditor requested a GL detail for each asset to verify the amounts with my spreadsheet. The depreciation schedule was set in the beginning of each fiscal year and then updated at year end for new and disposed assets. A little more cumbersome, but definitely doable if your software can't do it for you!

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

The general concept is....(same as other inventoriable asset)

Physical existence/Inventory/ownership (including condition or appraisal) = Transactions (initial recording, transactions/improvements, depreciation) = Balance Sheet number

Deanna Miller
Title: Chief Financial Officer
Company: Professional Plumbing Group
(Chief Financial Officer, Professional Plumbing Group) |

I like Emerson's reference to inventoriable assets. Like inventory, periodically you need to do a physical count of your fixed assets to verify their existance, continued use/useful life, etc. However, unlike material inventory, you usually don't do the physical count of fixed assets every year because the assets don't turn over as frequently. In between the physicals, you have the detailed listings Rachel mentions to confirm that you have records that tie to your balance sheet number and roll forward the net assets for capital spending, depreciation, disposals and transfers.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Th most difficult part of the fixed asset equation is software/application capitalization.

I'd like to hear opines on verifying the numbers (the accounting discussed above is the same).

Kevin Arvisais, MBA
Title: Corporate Controller
Company: Justice Resource Institute
LinkedIn Profile
(Corporate Controller, Justice Resource Institute) |

Good morning.
I have worked for a large nonprofit for 27 years and have implemented nearly all the core financial applications. We use a separate piece of software from our accounting applicatio, Sage FAS, to track out fixed assets (facility, vehicles and equipment). A master Excel spreadsheet reconciles FAS to our balance sheet accounts by cost center for all three asset classes. This approach has worked seamlessly for 17 years. In my experience, I have found most integrated FA modules do not offer a great deal of flexibility and customization to for the company's accounting structure so having a separate piece of software was very beneficial for getting what you want.

We do a physical scavenger hunt for our tangible fixed assets on a biennial basis (every 2 years) per our company audit policy. Doing a physical count every year would be too chaotic for staff to cope,

As for software capitalization, we amortize 'off the shelf' software ($5,000+) for three years; customized software for five years.

Hope this input helps.

--Kevin

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

I had a client that was capitalizing every FA bought regardless of cost as well as a percentage of individuals in the IT department who managed and/or wrote custom reports for the accounting system.

Imho this was excessive, and really didn't present a realistic view of expenses.

What's your feeling?

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