fin-fa-best practice

1、Best Practice Financial Processes: Fixed Assets,,Fixed Assets - Best Practice Objectives,,,,,,,Fixed AssetsObjectives,To maintain a complete register of all the organisation’s fixed assets which reflects location, age

2、, current values, associated cost centresTo calculate depreciation consistently with financial reporting requirementsTo optimise replacement policiesTo minimise ownership costs,Organisation,Asset recording integrated

3、with maintenance and non financial dataCentralised asset accountingAsset ownership devolved to business unit level,,People,Control focusedChallenge asset requisition proposals,Processes,Maintain asset registerAcquisi

4、tions and disposalsDepreciation chargeVerifying asset baseMaintaining of valuation basis,Controls,Asset verificationAsset valuationAcquisition and disposal authorities,Measures,Number of assets maintainedCost of de

5、partmentElapsed time to record asset,Information Systems,Asset ledgers integrated with GL and APDepreciation and project control by cost centreAutomated depreciation calculation,,,,,,,,Maintain fixedasset register,Co

6、ntrol acquisitionsand disposals,Manage periodicasset depreciation,Verify and valueasset base,Process Features,Determine asset categories for internal and statutory purposesMonitor asset maintenance chargesApply in

7、surance valuation to key assetsEnsure asset responsibility at BU levelIdentify asset usage,Set up appropriate control of asset acquisition and disposals across companyReport on acquisitions and disposals on a month

8、ly basisMonitor tax issues related to acquisitions or CIPEnsure BU responsibility for assets in their use and for disposal losses,Depreciate at point of asset useApply depreciation rules to asset classesDepreciat

9、ion rates in management accounts in line with statutory ratesLinks asset depreciation to production and product costs/development,Revalue key assets on a regular basis based on book value and high riskComprehensive as

10、set verification on regular periodic or rolling basis where asset cannot be verified via technical assumptions (most telco’s do not verify network assets: the fact that the network works is verification enough)Verify no

11、n capitalised assets,Fixed Assets - Best Practice Features,Maintain fixedasset register,Control acquisitionsand disposals,Manage periodicasset depreciation,Verify and valueasset base,System Features,On line asset reg

12、ister holding key data and current cost allocationCost code validation with GLAutomatic links to AP and Project Accounting system to capture acquisitionsRevaluation of features and mass transfers of assets to new cost

13、 centresLeased asset features compliant with accounting standards,Acquisition linked to purchase order and accounts payable ledgerDisposals linked to sales ledgerCIP linked to capital project accountingEffective tax

14、management integrated with the fixed assets system,Depreciation charged automatically to cost centres in GLForecast asset depreciation for budget purposesVariable depreciation rules for classes of assetsAssets can be

15、grouped for depreciation rules,Variable asset valuation mechanisms eg historic, current replacementComplete asset reports by physical location and cost centreReport on identified or missing assetsHold non capitalised

16、physical assists for verificationBar coding of assets for verification,Fixed Assets - Best Practice Features,Fixed Assets - Measures/Cost Drivers,No of Business Unit FTEs per Fixed Assets FTE,,,,,,,,,,,10 percentile,Med

17、ian,90 percentile,£7,£31,£151,Cost drivers,Fixed Assets cost per Business Unit FTE (in £s),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,Median,14 days,,,,,,,,,,,,,,,,,,,,,,90 percentile,40 days,,,,,,,10 percenti

18、le,1 day,Fixed Assets processing time,Complexity of assetsNumber of assets on registerNumber of asset movementsComplexity of depreciation policiesComplexity of authorisation proceduresRange of data heldNumber of us

19、ers of data range,Source: Statistics taken from Benchmarking database: 21 February 1997,,,Separate fixed assets moduleLack of asset ownershipCost of asset usage not attributed to productPerformed by Finance Departmen

20、t,Integrated systems for:Asset tracking via Geographical Information System (GIS)Asset usageNetwork Capacity PlanningAsset MaintenanceCapital project planning and controlProduct/service costingBU responsibility fo

21、r ownership,From,To,Fixed Assets - Trends,Fixed Assets - Critical Success Factors,These are a summary of the key business requirements, which must be met to achieve the objectives.,Asset accounting policies clearly docum

22、entedAppropriate coding by asset category establishedAuthority levels clearly definedProcedures surrounding Fixed Asset process are documented and communicated to staffBudgets in place for capital expenditureAll exi

23、sting assets identified and classifiedStaff trained in FA process and have clear roles and responsibilitiesStatutory and tax requirements understoodFA calendar in place and communicated to staffStanding data set up o

24、n the system reflecting asset accounting policiesAbility to model depreciation scenario,Fixed Assets - Level 0 Context Diagram,Fixed Assets - Level 1 Overview,Fixed Assets - Notes on Maintain Standing Data,Best Pr

25、actice FeaturesAsset accounting polices clearly documented; Master Data set up on the system to reflect these policiesAppropriate coding by asset category establishedProcedures surrounding the Fixed Asset process are

26、documented and communicated to staff including requirements for issuing new codesAsset Register Rules incorporated into Master File, which control issues of new numbers within structured coding schemeStaff trained in F

27、ixed Asset Accounting processes and have clear roles and responsibilities. They should have a good understanding of network and engineering areasSupervisory staff understand statutory and tax requirementsInternal Contr

28、ol RequirementsOnce entered, updates should be verified against the original requestsCodes will be received from the Master File and updates will be confirmed against the Master FileThe system will check that all requ

29、ired data fields are completeThere must be supervisory review for Master Data updates,Fixed Assets - Notes on Maintain Standing Data,Key Performance IndicatorsSpeed of update: time from receipt of request to modificati

30、on and verification of records: this should not exceed one dayNumber of input errors when asset details are validated: this should be zeroCost DriversComplexity of assetsNew types of assetsNumber of changes to physi

31、cal location coding,Fixed Assets - Notes Add Assets,Best Practice FeaturesLinked databases used in recording asset details, to increase accuracy of the asset register and to eliminate duplicate paper trailsAppropriate

32、asset “numbering” methods driven by users of asset information; bar coding used on relevant assetsDirect links to Project AccountingClear policy established for treatment of assets and guidance on how to classify diffe

33、rent types of assets, to reduce the number of reclassifications neededSystem interconnection to MIS (Management Information Systems) for tax and insurance planningAssets identified by “custodian”, i.e. person who contr

34、ols the asset, rather than a department or the company as a wholeUnified transfer pricing in all Business Units for asset transfersUse of asset transfer strategy to optimise the usage of assetsInternal Control Require

35、mentsAsset number controlsAll asset register updates reviewed after entry, to limit period end differencesUpdate details sent periodically to source and asset custodian (or other initiator of the update) for informati

36、on purposes,Fixed Assets - Notes Add Assets,Key Performance IndicatorsNumber of reconciliation at period end: if a reconciliation is needed between Fixed Assets and other accounts, this indicates that one or other of th

37、e accounts is not up to dateNumber of changes processedNumber of verification adjustmentsCost DriversNumber of assetsAverage useful life of assets (i.e. rate of asset turnover)Number of changes in Master Data leadi

38、ng to manual adjustments.(e.g. change in organisation codes)Number of revaluation's / disposals,Fixed Assets - Notes Depreciation calculation,Best Practice featuresIntegrated fixed asset systems to calculate d

39、epreciation charges for tax and accounting purposesDepreciation rates by asset category are based on useful life of the asset, rather than designed to meet accounting requirements onlyConsistency of depreciation metho

40、ds and rates across the businessInternal Control requirementsResults of depreciation run compared to expected amounts (from budget or forecast) to identify potential errors and over-runsUpdates to assets’ depreciation

41、 information must only be accepted if properly authorised and consistent with management/tax policyKey Performance Indicators Time taken to update depreciation data in fixed asset register at period close Reconciling

42、items on depreciation accounts: should be zeroCost DriversNumber of depreciation ratesNumber of assets,Fixed Assets - Notes Perform Period End Routine,Best Practice FeaturesAutomatic data flows between ledgers

43、, e.g., between Fixed Asset Register and General Ledger, Project Accounting, etc., to remove manual reconciliation effortSystem allows assets to be grouped or desegregated for reporting purposesInternal Control Requir

44、ementsSystem internal controls (e.g. user profiles)Timely and accurate clearance of system reject reportsReconciliation of budget Vs. actual period end totalsReconciliation of movement in fixed asset accounts for the

45、 month (e.g. new NBV = old NBV + additions - disposals - depreciation),Fixed Assets - Notes Perform Period End Routine,Key Performance IndicatorsTime taken to close Fixed Asset Register at period endTime ta

46、ken to complete the GL/FA reconciliation Differences during reconciliationTime to print out the period end reportsCost DriversNumber of asset recordsCPU time for generation of reportsReconciliation required to clea

47、r General Ledger mis-matchesNumber of necessary changes during reconciliation with General Ledger,Fixed Assets -Notes Verify Physical Assets,Best Practice featuresAll existing capitalised assets identified and clas

48、sifiedRegular physical verification, focused on high-value and high-risk areasUse alternative verification methods where appropriate eg review maintenance log, establish that asset is operating effectivelyInternal Con

49、trol requirementsRegular physical verification exercises and reconciliation to the Fixed Asset RegisterFixed Assets must ensure that transferred assets retain their original project number identification in the asset r

50、ecord, to ensure appropriate access to archived recordsCost DriversNumber of verifications required,Fixed Assets - Appendix 1 : IDEF Process Flow,The diagram below provides a key to the process diagrams used in this do