Importance of Fixed Asset Register and Timely Physical Verification

Managing and Maintaining the Fixed Asset Register is a very crucial part of all types of organizations. It helps the organization know the total number of assets they have. Many times we have found that the small business is not maintaining the Fixed Asset Register, they think that they can calculate the assets on their fingertips, but when their business grows, it will create difficulties in counting the total number of assets.

Fixed Asset Register: –

1) Fixed Assets are the main part of the business which helps in generating income. Fixed Assets are further divided into three parts: –

  1. Tangible Assets: – Which include Machinery, Vehicle, Equipment, Furniture, Building, etc.
  2. Intangible Assets: – This includes Software, Patents, Copyrights, etc.
  3. Capital Work in Progress: – It is also a part of a fixed asset because it will be considered after some time as a part of a fixed asset.

(Fixed assets of the company are called Capex items because these are purchased for the long term.)

2) Fixed Asset Register Include: –

          A) Name of the Asset

          B) Asset Code

          C) Location of Asset

          D) Location Code

           E) Purchase Date

           F) Date of Capitalisation

           G) Expected Life of Asset as per Companies Act,2013

           H) Asset Purchase Cost as Per IND AS 16, IND AS 38

            I) Salvage Value

           J) Depreciation

           K) WDV at the end of the Financial Year.

The main purpose for the maintenance of Fixed Asset Register is to have accurate information of all assets which company holds on that date. The Fixed Asset register can be maintained in Excel Sheet or Software or both.

3) Benefits of Maintaining Fixed Asset Register: –

    A)  It helps in knowing the total number of assets that a company holds on a particular date and helps in disposing of the assets which are not useful. It helps in the decision making of the company. It helps the auditor to verify the asset easily physically in that location.

   B) Compliance reporting under various Act: –

        As Per CARO 2020, details of each tangible and intangible assets to be provided to the auditor. 

  • Depreciation: –

Accurately calculation of depreciation is very important for any organization. Most organizations are not able to calculate the depreciation accurately. By maintaining a Fixed Asset Register it is very easy for a company to calculate the depreciation amount at the right value.

Physical Verification of Fixed Assets: –

  Physical verification of fixed assets is a very crucial part of any organization. It helps the organization in identifying the assets physically which are shown in books. It is the best way to know the actual value of Non-Current Assets in the books after the adjustment of assets that are not identified at the time of physical verification and which further helps the organization in decision making.

Tenure of Physical verification of Fixed Asset: –

   The management should conduct the physical verification from a third party at least once every three years.

The requirement of physical verification of Fixed Asset: –

  1. Statutory Compliance as Per CARO,2020.

i) Whether the management has carried out physical verification of the assets at different intervals reasonable with the size of the company.

ii) Whether the material discrepancies if any noticed on physical verification have been accounted for in the books of accounts.

  • Actual Existence of Assets which are shown in the company books of accounts.
  • Control over unauthorized use of Fixed Asset.
  • To check the location of fixed Assets as per company records.

This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.

Posted by: CA Aman Aggarwal

AKGVG & Associates

Leave a Reply

Your email address will not be published. Required fields are marked *