Fixed Assets Verification for Business Plan
Table of Contents
Fixed Assets Verification for Business Plan – Important elements of fixed assets verification for business plan are assets register, assets verification methods and procedures. Others are internal control processes relating to physical existence of the assets, assets acquisition and disposal authorisation, and assets value (historical, current and revaluation costs).
Fixed assets verification are important when making business plan as a new business, or an existing business going for re-engineering. It’s also very important for internal control exercises, and of course at annual auditing exercises.
What Do You Want:
If you are involved in one of the above categories, this article is for you. Whether a new business or an existing one you will always want to confirm the existence, ownership and value of your fixed assets from time to time. This article aims at showing you how to go about it.
Fixed Assets Verification for Business Plan
What is physical verification of an
asset?
asset?
Verification means ‘Proving the truth’ or ‘Confirming’ the existence of something. A physical verification of assets is a process conducted by auditors/businessmen/business consultants/valuers to make sure that the assets of a company actually exist. You have to do this for your business. It’s a line-by-line reconciliation of fixed assets accounting records to fixed assets found physically existing during the physical inventory taking process. In doing this, there is one important document you must have in place. It’s the fixed assets register.
Fixed Assets Verification for Business Plan
Fixed Assets Register:
What is the meaning of fixed asset register?
This is a register used to keep track of the fixed assets of your business. The register shows the value of assets, date of acquisition or disposal and other details necessary to compute for depreciation and deal with the tax implications.
What really are the information needed from this register and the verification exercise?
The following information are verified.
- 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. - Authorization – the authorisation for the
acquisition is verified here. - Value – the aggregate value in a particular
class of fixed asset is verified. This will show additions, disposals and
accumulated depreciation. - Existence – the quantity in existence is
verified here. - Beneficial Ownership – If the assets
are owned by the business, leased or on hire purchase – will be verified here. - Presentation in the accounts
– This is necessary. For instance, assets on hire purchase do not need to
reflect as the business assets.
Methods of verification:
- 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.
How do these concern you?
This concerns you in many ways.
- 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. - 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. - 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. - No bank will want to give you loan or bank guarantee
without knowing your business value. - In addition, an incoming investor who is coming to
take a percentage of the shareholding will certainly know the value of the
business. - 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.
READ ALSO: CAPEX Projection for Business Plan
Fixed Assets Verification for Business Plan
The point here is that all of these things are based on the value of the fixed assets. Do you wander why, it’s an important matter for discussion.
You can now see that you may need experts to help you do some of these things. In fact, when assets need revaluations, and valuers are required a different ballgame is played entirely.
Again assets under hire purchase or lease deal require carefulness which can only be exercised by trained professionals.
When assets are under insurance cover, the game changes also.
Fixed Assets Verification for Business Plan
I could be of help to you if you contact me. If you are a beginner in business, I will give you free business coaching for 12 calendar months.
I know you enjoyed this article. Do some one a favour by sharing this to reach your friends and well-wishers. They also may need to know all of these.
Founder/Managing Partner of Complete Full Marks Consultants Ltd. An Economist turned Chattered Accountant and Tax Practitioner with over 37 years of industrial experience.
Thanks to my father who shared with me concerning this blog, this blog is genuinely awesome.