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Assets Verification/Audit:

1.  Cost – this is the historical cost, i.e.
   the cost of purchase. Some times other type of costs like market price, current
   price, revalued price come to play.
2.  Authorization – the authorisation for the
   acquisition is verified here.
3.  Value – the aggregate value in a particular
   class of fixed asset is verified. This will show additions, disposals and
   accumulated depreciation.
4.  Existence – the quantity in existence is
   verified here.
5. Beneficial Ownership – If the assets
   are owned by the business, leased or on hire purchase – will be verified here.
6.  Presentation in the accounts
   – This is necessary. For instance, assets on hire purchase do not need to
   reflect as the business assets.

Best practice recommends that departments perform a physical verification of the assets listed at least once a year and notify the Fixed Asset Help-desk of any changes required.

• This include physical inspection – this is the
  process of actually seeing and touching the fixed assets to confirm it’s
  existence.
• Another method is the verification of the title
  making use of every relevant documents. It must show that the asset in question
  belongs to the business or not.
• Thirdly, third party verifications are also done.
  This is by confirming from debtors, banks, leasing  or hire purchase companies the transactions of
  such assets.
• Lastly, the accounting documentation including the
  assets register ( to verify existence, acquisition, disposal and depreciation),
  internal control measures are verified. Note that an old asset should have to
  appear in the previous year’s balance sheets, while current year purchases will
  have readily available acquisition documents.

1. You need to show your business net worth. No
   investor would want to be wooed into investing. He must be sure of the net
   worth of the business. And you know that the major value of the business
   resides in its physical assets. The assets must therefore, be in existence and worth
   at least the book values.
2. Again, these fixed assets generate fix costs that
   are charged to the income statement periodically, in form of depreciation. This
   and the administration expenses form what is called OPEX ( Operation Expenses).
   It also plays part in cash flow statement of the business.
3. An investor can come over in form of  merger or acquisition. This will certainly
   require complete business valuation process. In any of these two cases a
   complete asset verification exercise is very necessary.
4. No bank will want to give you loan or bank guarantee
   without knowing your business value.
5. In addition, an incoming investor who is coming to
   take a percentage of the shareholding will certainly know the value of the
   business.
6. Fixed assets have tax implications because the tax
   authorities do not accepts the management accounts depreciation allowances,
   instead they grant their own capital allowances. The purchase  of new fixed asset and disposal of an old one
   all have tax implications.

In doing your business plan, be it an elaborate one, simple or one or two page business plan, you make assumptions which give indications of what you would want to achieve within the specified period.

READ ALSO: CAPEX Projection for Business Plan

Fixed Assets Verification for Business Plan