Fixed Assets Policy and Procedures - KnowledgeLeader

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Nov 18, 2013 (3 years and 11 months ago)

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1

FIXED ASSETS

POLICY & PROCEDURES

Prepared By:


Approved By:


Revision Date:


Effective Date:


The following sample outlines a set of policies and procedures for
establishing the
standards and
procedures for ensuring that Company accounts for capital assets and depreciation are in compliance
with management’s objectives and generally accepted accounting principles.

PURPOSE:

This policy establishes the standards and procedures for
ensuring that Company accounts for capital
assets and depreciation are in compliance with management’s objectives and generally accepted
accounting principles (“GAAP”).

SCOPE:

This policy applies to all non
-
merchandise company assets and personnel involved

in procuring, tracking,
accounting for, or in possession of company assets.

POLICY:

It is the Company’s policy to capitalize the cost of computer equipment, furniture and leasehold
improvements exceeding $1,000 (including tax, freight, installation, etc.)
that

meet certain guidelines
.
Normal repairs and maintenance costs are expensed as
incurred
.

DEFINITIONS:



Capital assets
-

Property, hardware, software, furniture and equipment acquired for use in the
course of the Company’s business
.
Capital assets are expected to have useful lives in excess of one
year
.
Computer software purchased
for internal use is considered a capital asset
.
Computer
software internally developed for internal use or for re
-
sale is not addressed in this policy statement.



Leasehold improvements
-

Modifications or attachments to a leased facility
that

are an integr
al part
of the structure
.
Leasehold improvements include internal building configurations such as walls,
electrical work, carpeting, as well as facility
-
related equipment such as heating and air conditioning
equipment.


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2



Installed cost
-

Amounts expensed to

acquire a Fixed Asset and place it into service
.
The installed
cost is the basis used in the fixed assets records for valuation of the asset acquired.



Repairs and maintenance
-

Expenditures made to maintain an existing asset in usable condition
without e
xtending the asset's useful life or significantly increasing its capacity.



Freight
-

Expenditures made to transport the asset to the asset's resident location.



Sales tax
-

State and local sales tax applied to the purchase value of an acquired asset.

PROCED
URES:

1.

Acqui
sition and Capitalization



Capital asset additions
are
purchased
within the established

approval
authority
policies of the
Company
.



The invoiced c
ost net of any vendor discounts, plus sales tax,

freight
,

and all other significant
costs necessary to
prepare an asset for use is

capitalized
.
Other capitalizable costs include initial
inspection and testing, installation costs and similar expenses only if material in amount
.
Expenditures that do not meet the

minimum dollar
threshold of $600
requirement
are

expensed
.
The cost of maintenance contracts on equipment and software
are

expensed when paid.



All capitalized assets
are

depreciated using the straight
-
line method over their estimated useful
lives as foll
ows:

Asset category

Estimated useful life

Computers and related equipment

3 years

Purchased software

3 years

Non
-
computer office equip
ment

(
Phones,
copiers, calculators, typewriters, etc.)

5 years

Furniture and Fixtures

5 years

Leasehold improvements

Length of lease of 5 years, whichever is less



Any exceptions to this policy
are

reviewed and approved by the Controller.

2.

Depreciation



The entire cost of an asset
is

depreciated
.
Depreciation is allocated monthly over the estimated
useful life of the
capital asset, as detailed below.



Depreciation is

commence
d

in the first month after the asset is placed into service
.
Fixed assets
are

depreciated on a straight
-
line basis over their estimated useful life
.



Guidelines for estimated useful lives by capit
al asset category are as follows:


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3


Capital Asset Category

Estimated Useful Life

Buildings

25 years

Building Improvements

Remaining life of the building**

Leasehold Improvements

Term of the lease**

Machinery and Equipment

4 years

Furniture and
Fixtures

5 years

Automobiles

4 years

Personal Computers

3 years

Laptop/Notebook Personal Computers

2 years

Other Data Processing Equipment

4 years

Personal Computer Software

2 years**

Client


Server Software

3 years**

Leased Equipment

Term of the
lease**

** Apply the shorter of the listed term or the estimated economic life of the specific asset.



The above useful lives may be affected by changes in the business and technological
environment or the use of the equipment.



Depreciation expense for a
fixed asset begins in the month following the acquisition date of the
asset and continues until the accumulated depreciation equals the original installed cost, or until
the asset is retired from service
.



A fully depreciated fixed asset remain
s

in the fi
xed asset sub
-
ledger until the fixed asset is retired
from service.

3.

Transfers



The transfer of fixed assets bet
ween departments, divisions,
business units

and stores

ha
s

no
impact on
their

net book value
.
All assets are transferred at their net book value
with no
recognition of a gain or loss by the department transferring the asset
.



A change in a capital asset’s location or ownership occurs when

a capital asset is
:



MOVED to another office or building, even if the ownership remains the same.



TRANSFERRED t
o another department, even if the location remains the same.



TRANSFERRED to another primary user, even if the location and/or department
remain

the
same.


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Inter
-
departmental transfers of assets
are

communicated
to
Accounting

on
an

Asset Removal
Form

(see Appendix A
)

which
include
s

the asset’s serial number,

description,
cost, reason for
transfer, current location, destination

and the name of the departm
ent to receive the property
.
A
cop
y of the Asset Removal Form
is

submitted to the Accounting Manag
er

by the department
manager transferring the asset
indicating

that the asset is
being
transferred
.
The department
manager to whom the item was assigned originally
is

held accountable until
the asset

is
received
by the acquiring department manager
.
Once
the asset is received
, the department manager
acquiring the property assumes responsibility
, and sign
s

and complete
s

the Asset Removal Form
.
The form
is

submitted

the Accounting Manager
indicating that the asset has been received.



All costs associated with the transfer
are

expensed
.

4.

Retirements and Disposals



Company owned capital a
ssets are

retained as long as they continue to contribute in an efficient
and economical manner to the Company’s operations
.
This may extend beyond the u
seful life
used for depreciation purposes
.
Only when the assets are disposed of
is

the original asset and
accumulated depreciation written off the fixed asset record
.



Capital assets have a zero net book value at the time of retirement or disposal
.
If t
here is any
remaining value, the asset
is

first written off to the appropriate account
.



All disposals of capital

assets
are

approved by Department Managers
prior to di
sposal
.
The
asset’s
serial number, description, cost, reason for retirement/disposal
is

communicated to
fixed
assets

on an Asset
Removal

Form
.
Department Managers sign and complete the Asset Removal
Form

(see Appendix A)

prior to submission to
fixed assets
.



All sales of Company assets to Company employees along with donations of Company c
apital
assets
are

approved by the
fixed assets

and
M
IS Departments
.
An Asset Disposal Form
is

completed prior to the sale or disposition
.
The
fixed assets

Department
is

provided with complete
documentation (including asset tag/serial number and payment b
y check) of sales on a timely
basis by the department coordinating the sale.



Upon approval of disposition, the asset
is

disposed of in the following manner


sold, donated,
scrapped, or used in a trade
-
in transaction if authorized
.
Upon disposition of the

asset, the
fixed
assets

d
epartment
is

notified and the asset
is

deleted from the asset records and a gain/loss
is

recorded.

5.

Financial and Physical Control



On an annual basis,
fixed assets

furnish
es

each department a report showing a listing of the
assets assigned to that department and any acquisitions, disposals and transfers during the past
year
.
Any discrepancies noted by the department
are

notified to
fixed assets

as soon as
possible.



Capital a
ssets
are

physically counted

on a periodic basis
.
The fixed assets team
perform
s

a full
physical inventory of
Company capital assets on a two
-
year rotational basis
.
Each department
is

notified of the count procedures and the dates of the physical invento
ry
.



Capital assets that are not accounted for after the physical inventory
are

investigated, reported to
the appropriate Department Manager and based on the value of the write
-
off, the appropriate
level of Management
is

informed
.
Shrinkage
is

written off to the appropriate account after
management approval.


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5

APPROVAL/DOCUMENTATION
:

Accounting Records



Upon asset acquisition, the
fixed assets

department is responsible for assigning and attaching asset
number tags to the property where it can be readily located
.
F
ixed assets

maintain
s

a detailed listing
of each capital asset item along with the following:



Depreciation records
that

include the description
;



Date acquired
;



Vendor name
;



Cost basis
;



Assigned department
;



Depreciation method/life
;



Accumulated depreciation
;



Net book value
.

Approvals



Capital asset additions
are

purchased within the established financial approval policies of

the
Company in accordance with the Approval Policy.


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6

APPENDIX A


Store Name/Store Number
Form #
Removal Code
Condition Codes
R1. Lost
R4. Surplus Operative
R7. Return to Title Holder
C1. New
C4. Repairs required-Good
C7. Scrap
R2. Stolen
R5. Salvage
R8. Sold
C2. Used-Good
C5. Repairs required-Poor
R3. Damage
R6. Trade-In
R9. Transfer
C3. Used-Fair-Poor
C6. Salvage
Removal
Code
Qty
Description,
Manufacturer, Model,
Serial Number, Color
Current
Location
Destinati
on of
Transferr
ed Asset
Condition
Code
Reason for
Disposition or
Transfer
Orig. Value
Current
Value
Contact information on disposals/transfers contact:
Name:
Phone:
Exact Location of Equipment:
Name:
Phone:
Exact Location of Equipment:
Signed:
Signed:
Department Head
Date
Fixed Assets Supervisor
Date
Releasing Department Certification
Please Note: This form must be approved by Fixed Assets Supervisor if equipment is removed from inventory.
Type Name:
Type Name:
"I relinquish inventory accountability for the above described equipment."
Contact information of receiver of transferred assets:
Fixed Assets Removal Form
District Manager/Store Manager
Contact Number
Date
Asset Tag Number