Asset management

What is an Asset:
An asset is anything of value or resource of value can be converted in to cash. Individual,
companies, and governments own assets. For a company an asset might generate revenue or
the company might benefit in some way from owning or using asset.

An asset is a resource with economic value that an individual, corporation or country owns or
controls with the expectation that it will provide a future benefit. Assets are reported on a
company’s balance sheet and are bought or created to increase a firm’s value or benefit the
firm’s operations. An asset can be thought of as something that in the future can generate cash
flow, reduce expenses or improve sales, regardless of whether it’s manufacturing equipment or
a patent.

Assets can be broadly categorized into short-term assets, fixed assets, financial investments and
intangible assets.

Nature of an asset:
● Human assets
● Financial assets
● Information assets
● Intangible assets
● Physical assets

1. Human assets:
Human asset management is part of a company that manages human assets. It is the
management of the employees as assets combining many conceptual elements of an
employee’s life cycle through an organization focusing on that people are a company’s most
important assets.

Human assets are the part of intangible assets the company has. The behaviors, knowledge and
competence of the workforce have a fundamental (influence on the performance of the
physical assets
 2. Financial assets:
A financial asset is a tangible liquid asset that gets its value from a contractual claim. Cash,
stock, bond deposits and like are examples of financial assets. Unlike land, property,
commodities or other tangible physical assets, financial assets don’t necessarily have inherent
physical worth.

Financial assets such as checking accounts, savings accounts and money market accounts are
easily turned into cash for paying bills and covering financial emergencies, such as car repairs.

3. Information assets:
Information asset is a body of knowledge that is organized and managed as a single entity.
generally speaking this means that it improves future revenues or reduce future costs.

Information assets have recognizable and manageable value, risk content and life cycles that
value of the assets increases in direct relationship to the number of people how or able to make
use of the information.

Good quality data and information or essential to develop, optimize and implement asset
management plan

4. Intangible assets:
An intangible asset is non-physical asset having a useful life greater than one year. These assets
are generally recognized as part of acquisition, where the acquirer is allowed to assign some
portion of the purchase price to acquired intangible assets . few internally generated intangible
assets can be recognized on an entity’s balance sheet.

Examples of intangible assets are marketing related intangible assets, customer related
intangible assets, contract based intangible assets, technology based intangible assets.

Organization’s reputation and image can have a significant impact on infrastructure investment,
operating strategies and associated costs.

5. Physical assets:
A physical asset is an item of economic, commercial or exchange value that has a material
existence. Physical assets are also known as tangible assets. For most businesses physical assets
usually refer to properties, equipment and inventory.

Plants, Machinery, Building , Vehicles, Property and other items with distinct values. These are
example of physical assets.
Asset management:
Asset management is defined as, refers to any system that monitors and maintains things of
value to an entity or group. It may apply to both tangible assets and intangible assets. Asset
management is systematic process of developing, operating, maintaining, upgrading and
disposing of assets cost effectively.

This term is most commonly used in the financial sector to describe people and companies who
manage investments on behalf of others. Those include for example investment managers that
manage the assets of a pension fund. Asset management is the direction of client’s cash and
securities by a financial services company usually an investment bank. The institution offers
investment services along with a wide range of traditional and alternative product offerings
that might not be available to the average investor. The account is held by a financial institution
and includes checking writing privileges, credit cards, debit cards, margin loans, the automatic
sweep of cash balances into a money market fund and brokerage service.

Enterprise asset management

Infrastructure asset management

Property asset management

Physical asset management

Strategic asset management

Facilities asset management and many others.

The emerging standards converge the opinion to the term ​Asset Management.

Evolution of asset management discipline:

Asset management is not new. People have been managing assets for thousands of years. What
has changed however is the cumulative recognition that good asset management involves
optimizing with any absolute constraints, the mix of cost, risk and performance over whole
asset life.

The PAS 55 2004 British standard was originally produces in 2004 by a number of organizations
under the leadership of the ​Institute of Asset Management.

PAS 55:2008 was released in December 2008 along with a toolkit for self assessment against
the specification.
The International Standard ISO 55000/1/2 passed by international body in December 13 and
likely to be released by Feb 2014.

Principles of good asset management​.

There are principles of asset management system.

● Holistic .
● Systematic
● Systemic.
● Risk based
● Optimal .
● Sustainable.
● Integrated.

Holistic.

In holistic asset management system organisations looking at the whole picture

For example.

Combined implications of managing all aspects .

Systematic

It is a methodical approach. it promote consistent. This approach is repeatable and auditable

decisions and actions .

This paper proposes a new method to measure and monitor the risk in a banking system. Standard tools
that regulators require banks to use for their internal risk management are applied at the level of the
banking system to measure the risk of a regulator portfolio. Using a sample of international banks from
1988 until 2002.

● Use the filter as a tool for building predictors.

● Use simple risk measurement to monitor the portfolio.
● We back test portfolio with indifferent allocation scheme.
1 .Passive portfolio .
2 .Dynamic portfolio.
st​
1​ is a risk based construction.
2​nd​ is performance based construction.
Systematic decision.
The decision process of the trading systematic concerns three main parts .
Finding trading signals for an universe of financial instruments.
Combing trading signals to build a portfolio.
Systematic both in the bull and bear markets .
Systematic on the capital allocation between products.
No performance driven no human intervention
Managing the risk of the instruments and the portfolio.
Remarks”
Another important part is the systematic execution.
This part is usually masked by the higher frequency
Trading.

Systemic.

Considering the assets in their asset system context and optimizing the asset system value

This paper proposes a new method to measure and monitor the risk in a banking system .standard tools
that regulators require banks to use for their internal risk management are applied at the level of the
banking system to measure the risk of a regulator portfolio. Using a sample of international banks from
1988 until 2002, I estimate the dynamic and correlation between bank asset portfolios.

To obtain measures for the risk of a regulator s portfolio, I model the individual liabilities that the
regulator has to each bank asset.

Risk based.

This approach focusing on resources and expenditure and setting priorities , appropriate to identified
risks and the associated cost/ benefits.

Forced by pressure from the regulatory authorities, network operation in the liberalized market are
increasingly confronted with the need to reduce maintenance costs and expenses for replacement
investment while ensuring system availability determined by performance indices in parallel .

Measures to enhance efficiency alone do not suffice to fulfil these requirements. Rather risk based asset
management is well suited to reduce cost while ensuring network quality at the same time .

It analyses the reliability and economics importance of operating resources and estimates the monetary
risk assessed over a longer timeframe .with the proven in practice risk based asset management
methodology developed jointely by AT kearney and Salzburg AG Austria , savings of approximately 15%
of the controllable costs in the network can be achieved with nearly constant risk.

Risk management.

The process concerns many important questions.

How to measure or to monitor the risk?

How to model the crash scenario or stress _ test?

How to control and manage the risk?

How to allocate capital based on risk constraints?

Optimal.

Establishing the best value compromise between competing factors , such as performance, cost and
risk, associated with the asset over their life cycle;

Sustainable.

Considering the long term consequences of short term activities to ensure that adequate provision is
made for future requirements and obligations( such as economic or environmental sustainability, system
performance, societal responsibility and other long term objectives.

Integrated.

Recognizing that interdependencies and combined effects are vital to success. This requires a
combination of the above attributes , coordinated to deliver a joined up approach and net value .

Method and system for integrated asset management utilizing multi level modeling of oil field asset?

A method of creating an integrated asset management system for an oilfield , the method including :
creating a plurality of model representing asset components each model having more than one level of
detail ; connecting the more than one model to communicate with one another to create and integrated
asset management system utilizing the selected levels of detail to predict a characteristic of the
integrated asset.

Banking stability measures.

This paper defines a set of banking stability measures which take account of distress dependence among
the banks in a system , thereby providing a set of tools to analysis stability from complementary
perspective by along the measurement of

1 common distress of the bank in a system )

2 distress between specific bank

3 distress in the system associated with a specific bank .

Our approach defence the bank system as a portfolio of bank and infers the system multivariate density.
(BSMD)from which the proposed measure are estimated .

The BSMD embeds the banks .

What are 'Current Assets'

Current assets is a balance sheet item that represents the value of all assets that
can reasonably expect to be converted into cash within one year. Current assets
include cash and cash equivalents, accounts receivable, inventory, marketable
securities, prepaid expenses. and other liquid assets that can be readily
converted to cash.
In the United Kingdom, current assets are also known as current accounts
BREAKING DOWN 'Current Assets'
Current assets are important to businesses because they can be used to fund
day-to-day operations and pay ongoing expenses. Depending on the nature of
the business, current assets can range from barrels of crude oil, to baked goods,
to foreign currency. On a ​balance sheet​, current assets will normally be displayed
in order of ​liquidity​, that is, the ease with which they can be turned into cash.
Assets that cannot feasibly be turned into cash in the space of a year – or a
business' operating cycle, if it is longer – are not included in this category and are
instead considered long-term assets. These also depend on the nature of the
business, but generally include land, facilities, equipment, copyrights, and other
illiquid investments.
Key Components of Current Assets
Accounts receivable​, bills to customers that have yet to be paid, are considered
current assets as long as they can be expected to be paid within a year. If a
business has been making sales by offering loose credit terms, a chunk of its
accounts receivables might not come due for a longer period of time. It is also
possible that some accounts will never be paid in full. This consideration is
reflected in an ​allowance for doubtful accounts​, which is subtracted from
accounts receivable. If an account is never collected, it is written down as a ​bad
debt expense​.
Inventory​ is included as current assets, but this item should be taken with a grain
of salt. Different accounting methods can be used to inflate inventory, and in any
case it is not nearly as liquid as other current assets. It may not even be as liquid
as accounts receivable, which can be sold to third-party ​collection agencies​,
albeit at a steep discount. Inventories tie up capital, and if demand shifts
unexpectedly, which is more common in some industries than others, inventory
can become backlogged. A seemingly healthy current assets balance can
obscure a weak ​inventory turnover ratio​ and other problems.
Prepaid expenses​ are considered current assets not because they can be
converted into cash, but because they are already taken care of, which frees up
cash for other uses. As the year progresses, the value of prepaid expenses as
assets decreases; they are ​amortized​ to reflect this fact. Prepaid expenses could
include payments to insurance companies or contractors.
Ratios with Current Assets
Components of current assets are used to calculate a number of ratios related to
a business' liquidity. The ​cash ratio​ is the most conservative: it divides cash and
cash equivalents by ​current liabilities​, and measures the ability of a company to
pay off all of its short-term liabilities immediately.
The quick ratio or ​acid-test ratio​ is slightly less stringent: it adds cash and cash
equivalents, marketable securities and accounts receivable, and divides the sum
by current liabilities. this ratio does not classify inventory as a quick asset, and
hence, does not include it in its calculation. This gives a more realistic picture of
a company's ability to meet its short-term obligations, but can be skewed by a
backlog of accounts receivable.
The current ratio is the most accommodating, dividing current assets by current
liabilities. It should be noted that in addition to accounts receivable, this measure
includes inventories, so it probably overstates liquidity in many cases, especially
for retailers and other inventory-intensive businesses.
In personal finance, current assets include cash on hand and in the bank, as well
as marketable securities that are not tied up in long-term investments. In other
words, current assets are anything of value that is highly liquid. Current assets
can be used to pay outstanding debts and cover liabilities without having to sell
fixed assets.

FIXED ASSET
A fixed asset a long term tangibal piece of property that a firm owns and uses in its operation to
generate income. Fixed asset are not expected to be consumed or converted into cash within a
year.

Examples
Land

Building

Manufacturing equipment

Furneture

Fixture

Fixed asset management

Fixed asset management is an accounting process that seeks to track fixed asset for the
purpose of financial accounting, preventive maintenance, theft deterrence.

Organization face a significant challenge to track the location, quantity, condition, maintainness
and depreciation status for their fixed asset. A popular approach to tracking fixed asset uses
serial numbered asset tags, which are labels often with bar codes for easy and accurate
reading. The owner of the assets can take inventory with a mobile bar code reader and then
product a report.

Off the-shelf software packages for fixed asset management are marketed to businesses small
and large. Some enterprise resource planning systems are available with fixed assets modules.

Requirements for maintaining fixed

​

asset record
A fixed asset record mandatory under section 209(1) of the companies act. 1956. Company
requires to maintain various books of records it include details relating to all its assets that form
a part of its total fixed asset records. Any failure to maintain this record on required by the
statue may entail penality, which may extend to imprisonment in some cases and

● Enterprises need to follow the AS-10 accounting for fixed asset and AS-6 depreciation
accounting
● Enterprises can also maintain Fixed Asset Register but it is mandsatory in some cases

FIXED ASSET REGISTER

A fixed asset register is nothing more than a list of fixed asset that belong to an entity.
Traditionally the fixed asset register was maintained in written form by a bookkeeper using a
book that was set aside specifically for that purpose. Nowadays, it is more often held in
electronic formate is an accounting system.

The main purpose of a fixed asset register is to keep track of the book value of the assets and
determine depreciation to be calculated and recorded for management and taxation purposes.
A secondary purpose is to allow for the easy identification of an asset by assigning each asset a
unique ID which may be printed on lables in the form of barcode.

IMPORTANCE OF FIXED ASSET REGISTER

An asset register is comprehensive document which shows the assets that a business owns.
These assets may include land, building and improvement plant and equipment such as office
equipment, manufacturing equipment, motor vehicals, trucks, computer software,
infrastructure including power intellectual property buildings, patents, trademarks, copyrights
etc. Other information that is commonly held for each asset includes:

● Date of purchase
● Acquisition cost including installation cost
● Estemated useful life
● Written down value
● Annual amortization/depreciation

BENEFIT
1. Assists in both short and long term planning: A well prepared register presents a
valuable planning tool to any business. This helps the company to keep track of
details of each fixed asset, including their date of purchase and risk assessment.
2. Helps in preventing fraud:companies should have their business assets audited
regularly to check that the internal accounting controls systems are accurately
reflecting the company”s asset position. When there are accurate
Controls in place asset theft and the oppurtunity to lose assets at service providers,
customer sites etc reduce significantly.

The asset life cycle

A  key  process  within  asset  management  is  the  understanding  of 
asset  life  cycle.  There  are  four  key  stages  of  the  asset  lifecycle, 
which  this  section  will  classify  and  describe.  The  four  key  stages 
of the asset lifecycle are: 
  
Planning
Planning  is  the  first  stage  of  the  asset  life  cycle.  This  stage 
establishes  and  verifies  asset  requirements.  Establishment  of 
asset  requirements  is  based  on  evaluation  of  the  existing  assets 
and  their  potential  to  meet  service  delivery  needs.  Identification 
of  management  strategies  is  required  in  order  to  include  and 
analyze  the  need  for  an  asset.  Throughout  all  stages  of planning, 
it  is  crucial  to  make  sure  that  the  ongoing  development  adds 
value to the organization. 
  
If  the  company  uses  effectively planning in all asset management 
cycle stages, it will help in: 
  

● assessing the practical sufficiency of existing assets 

● ensuring resources are available when necessary 
● recognizing excess or under-performing assets 
● estimating  options  for  asset  provision  and  funding  asset 
acquisition 
● ensuring assets are maintained and liable 

The  progress  of  an  asset  management  project  as  component  of 
the  organization’s  planning     procedures gives the most excellent 
means of delivering value-added asset management. 
  
Acquisition
Taking  the  best decision on choosing the best option can only be 
made  after  defining  the  cost  and  the  requirements.  The  choice 
will  be  the  phase  of  further  planning,  the  acquisition  planning. 
The  acquisition  planning  includes  activities  involved  in 
purchasing  an  asset  with  the  aim  of  ensuring  cost  effective 
acquisition.  This  covers  activities  such  as  designing  and 
procuring  an  asset.  Appropriate  application  of  these  activities 
guarantees that the asset is fit for use. 
  
Initially,  the  organization  should  decide  whether  the  asset  will  be 
perpetually  bought  or  built.  Next,  establish  a  budgeting  for  asset 
acquisition  along  with  a  time  frame  for  its  acquisition  and  a 
purchasing  requirement.  A practical budget and cash flow should 
be  put  as  deficient  funds  or  otherwise  project  management  can 
put  at  risk  the  process  of  asset  acquisition.  Whenever  these 
requirements  are  met,  a  project  team  should  run  the  process  to 
make  sure that all acquisition process activities will be completed 
to meet service delivery and other organization objectives. 
  
Operation and mantenance
The  operation  and  maintenance  stage  indicates  the  application 
and  management  of  an  asset,  including  maintenance,  with  the 
aim  of  delivering  services.  The  plan  of  asset management should 
have  a  high  focus  on  asset  maintenance  issues.  Long  lived 
assets,  in  the  majority  of  public  sector  assets,  especially  roads 
and  buildings  require  particular  maintenance  during  their  life 
cycle. 
  
Throughout  this  time,  the  asset  should  be  focus  to  appropriate 
maintenance,  monitoring  and  potential  improvement  to  overpass 
any adjustment in operational requirement. 
  
Disposal
When  an  asset  reaches  its  end  of  a  useful  life,  it  can  be  treated 
as  a  surplus,  or  otherwise  is  considered  as  an  underperforming 
asset.  Disposal  should  be  treated  in  the  perspective  of  the 
effects  of  the  decision  on  service  delivery  and  any  departmental 
responsibilities.  A  special  focus  should  be  placed  on  cultural 
heritage  where  there  are  detailed  requirements  that  organization 
should  take  into  consideration.  If  in  the  near  future  an  asset  is  to 
be  disposed,  in  order  that statutory maintenance to be taken, the 
maintenance strategy should be properly adjusted. 
  
Any  organization,  in  either  public  or  private  sector,  will  need  to 
deal  with  asset  handling.  Recognizing  asset’s  value,  future  value 
and  costs  are  essential,  therefore  developing  a  strategic  asset 
management  plan  is  highly  preferred  and  required.  Such  a 
strategic  asset  management  plan  would  enable  an  effective  and 
well- organized asset and deliver services. 
  
There  are  already  different  systems,  methods,  software,  and 
standards  which  are  used  to  manage  different  types  of  assets.  It 
is  up  to  companies  what  to  consider  an  asset  and  what  to 
include  in  asset  portfolio.  Sometimes  assets  are  managed  as  a 
group,  rather  than  individual.  Such  groupings  of  assets  may  be 
by asset types, asset systems, or asset portfolios. 
  
One  of  the  newest  standards  for  managing  asset  is  ISO  55001 
Asset  Management.  According  to  ISO  55001,  this  new  standard 
leaves  an  open  topic  to  organizations  to  determine  what  to 
consider  asset,  so  ISO  55001  specifies  the  requirements  for  the 
establishment, implementation, maintenance and improvement of 
a  management  system  for  asset  management,  referred  to  as  an 
“asset management system”. 
  
Also  managing  assets  should  not  be  looked  from  isolated  mode. 
At  the  time  where  most  of  the  assets  managed  are  IT  and  even 
cyberspace  related,  care  should  be  looked  from  the  Information 
Security  Management  point  of  view  as  well  as  Cyber  Security 
point of view. 
  
ISO  55001  is  an  opportunity  to  manage  the  Cyber  Security  or 
Information  Security  form  looking  at  the  asset.  This  mean  a 
correlation  with  standard  related  to  business  continuity 
Management  ISO  22031,  Information  Security  Management  ISO 
27001/2 ; Building Cyber Security Framework ISO 27032. 
  
Managing  Asset  is  then  the  Indispensable  piece  to  provide 
security  for  any  business.  So  managing  means  having  the 
resource  qualified  with  the  expertise  and  training  to  do  it  in  a 
professional  way.  ISO  Standards  and  Professional  Trainings 
offered by PECB for ISO 55001: