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SOP For Fixed Assets

Management PPTX JN9OBYJQ
Original Title: SOP for Fixed Assets Management Pptx JN9OBYJQ

Uploaded by Ankit_cooldude on Mar 30, 2017

Standard operating Procedure Fixed Asset Full description

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 (' &MPHAS(&S O+ 'H& (*&+'(F(A'(O+ OF F(.&* ASS&'S A+* ('S
%&O%*(+- (+ F(.&* ASS&'S %&-(S'&% , ('S P&%(O*(A" PH)S(A"
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   'his po!icy document 3i!! app!y to the assets managed by the
Document 12 pages
company at a!! its units0
 (t 3ou!d a!so emphasi4e on the additions and de!etions made to the SOP for Fixed Assets
5xed assets0
Mainagement
 (t a!so focuses on the proper documentation of these assets0
JAK Group
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Fixed Assets Budget Procedure: Document 13 pages

RDCE WP 2022 DraS Index

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Budget: CCE NORTH
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10 Modi5cation
#0 Ac7uisition
Budget  
Acti6ity 2ise
Preparation

Budget Appro6a! by :
Asset !assi5cation:
 M*
18  "and  &*
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#8  Bui!ding
 $nit Head
98 P!ant , Machinery
 'echnica! Head
8  Furniture , Fixtures  Po3er *eptt0 Head
;8  O<ce &7uipment
=8  /ehic!es
>8 Others Post Budget Acti6ity:
?8  (ntangib!es omparison 3ith
Actua!

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Ac7uisition Process of apita! Assets: Financial Analysis-2

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Ana!ysis of (ndent
-ate O<cia!s 6erify
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, ma@e &ntry in -ate
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Stores 6eri5es Bi!! , arrange for
Prepare omparati6e
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INVENTORY OF PPE
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a6ai!abi!ity , ensures
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Accounting 'reatment :

108 Ac7uisition

*A'& /A"$&

Asset does not 18 Purchase Price

re7uire Asset re7uires
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reco6erab!e8
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98 Freight
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 apita!i4ation ,  apita!i4ation , 1=8
Accounting &ntry
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*eptt0 G8 "ess 'rade *iscounts ,
 'i!! such dateC %ebateC if any
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#08
*epreciation

 Definition : As per AS-6, it is a measure of loss in value of an asset arising from use, passage of time,
obsolescence due to change in technology & market conditions.

istorical !alue or "evalued !alue

 Depreciation depends upon :
#seful $ife of the Asset

%stimated "esidual !alue

 *epreciab!e Amount  Historica! /a!ue or %e6a!ued /a!ue  &xpected %esidua!

/a!ue
AdditionD&xtension to
Asset forms an integra! part of the
 Addition%'tension of Asset : be depreciated
main asset +o
separate!y
 )es
AdditionD&xtension to be
depreciated as per same rate
, o6er same !ife
 2here the historica! cost undergoes a change due to Iuctuation in exchange rateC price
adustment etc0 depreciation on the re6ised unamorti4ed amount shou!d be pro6ided o6er the
ba!ance usefu! !ife of the asset0
 $sefu! !ife may be re6ie3ed periodica!!y after ta@ing into consideration the expected physica!
3ear and tearC obso!escence and !ega! or other !imits on the use of the asset0 (n case of change in
usefu! !ifeC depreciation shou!d be pro6ided ta@ing into consideration the re6ised usefu! !ife o6er
the remaining no0 of years0

= AB Sugar Mi!!s "td

*epreciation as per Sch0 1 of ompanies Act:

 As per Sec0 9;K of the ompanies ActC a company is re7uired to pro6ide depreciation as
per rates speci5ed in Sch0 1 gi6en be!o30 Ho3e6er in case the management expects the
usefu! !ife of the asset to be higherC depreciation at !o3er rates can be pro6ided 3ith proper
 usti5cation for the same0 A!though Higher %ates can be pro6ided0
-enera!
%ates
 Asset (lock )D! "ate S$* "ate
+actory (uilding  /./0
1on +actory (uildings 23ffices, 4odo5ns, %mployees uarters %tc.7 8 .6/
9lant & *achinery 2continuous process plants7 8.// 8.;
*otor-cars, motor cycles, scooters & other mopeds 8.;< <.8
*otor (uses / ./
Data processing machines including computers 0 6.
4as cylinders including valves & regulators 0 6.
Sugar )orks "ollers  
+urniture & +ittings ;. 6.//
 +ot3ithstanding anything mentioned in this Schedu!e depreciation on assetsC 3hose actua!
cost does not exceed 56e thousand rupeesC sha!! be pro6ided depreciation at the rate of
hundred per cent0 Ho3e6erC if the aggregate 6a!ue of assets purchased exceeds 1KL of the
existing 6a!ue of its b!oc@ than such assets shou!d be capita!i4ed0

  ntangib!es shou!d be amorti4ed as per AS  #=0

=

> AB Sugar Mi!!s "td

3.) Sale & Discard of Fixed Asset :

SA"& *iscard

*ate /a!ue
*ate /a!ue
Asset to be
*ate on 3hich 6a!ued at
*ate on 3hich the the asset is !esser of +et
right o6er the asset (n6oice /a!ue retired from its Boo@ /a!ue or
is sacri5ced i0e0 acti6e use +et %ea!i4ab!e
(n6oice *ate /a!ue
Pro5t , "oss to
be routed Pro5t , "oss to
through PD" be routed
through PD"

4.) Capital Work In Progress CWIP) :

  =t is an asset 5hich is not completed to be used. All e'penses in relation to the >)=9 should be debited
to >)=9 Ac. )hen the asset is completed & ready to be used then Amount should be transferred to the
"espective Asset Ac. uarterly revie5 should be done in order to ensure that e'pense in relation to >)=9
is debited to >)=9 Ac & not in the respective e'pense Ac.

? AB Sugar Mi!!s "td

!.) "e#al$ation of an Asset :

 Assets are valued at istorical >ost in the books of accounts. =n the subse?uent years
the value of asset could be higher or lo5er than its present book value due to the inflationary conditions
of the economy.

+et Boo@ $P2A%* %e!ated to pre6ious +O

/a!ue decrease
 )&S
*O2+2A%*

%e!ated to pre6ious +O redit to PD" ADc to

increase the extent a!ready
charged to PD" ADc ,
 )&S the excess if anyC to
%e6a!uation %eser6e
*ebit to
%e6a!uation
%eser6e to the harge the redit the dierence
extent a6ai!ab!e , dierence to PD" to %e6a!uation
charge the ba!ance ADc %eser6e
to PD" ADc

+ote: N+o means 5rst time re6a!uation0 N)es means second and subse7uent
re6a!uations

G AB Sugar Mi!!s "td

%.) Ipairent of an Asset :

   As per AS @ ; , an organiation should make an assessment of the recoverable value of all its fi'ed assets
at every balance sheet date to find 5hether an asset needs to be impaired based on the factors given belo5 :
Factors causing
(mpairment

=nternal %'ternal

Significant >arrying Amt of

Decline in the Decline in  Assets B *arket
9hysical
%conomic *arket !alue >apitaliation of
Damage to an
9erformance of 3rganiation
 Asset
 Asset >hange in
%arlier Disposal
*arket =nterest
of an Asset
"ate

   As per AS - ;, if the "ecoverable !alue of an Asset is less than its >arrying
!alue than the asset should
be revalued at the "ecoverable amount by charging the difference to 9 & $ Account kno5n as =mpairment
$oss.
"ecoverable
 Amount :
>arrying Amount : =mpairment $oss :
 
1et (ook !alue of
"&SS
igher of
1et Selling 9rice
Co be debited to 
an Asset 9 & $ Ac
or
!alue in #se

1K AB Sugar Mi!!s "td

Fixed Assets 'agging , oding Process:

'(e process of scientificall n$*ering fixed assets is called tagging. '(e p$rpose of 'agging
assets is to track t(e o#eent of assets fro one place to anot(er place. A tag *ar code or
$ni+$e n$*er) (elps in #erification of t(e existence of assets and t(eir location, aids in
aintenance, pro#ides a coon gro$nd for co$nication *et-een t(e Acco$nts
Departent and t(e end$sers and recording t(e net *ook #al$e of asset in case of sale /
scrapping. All fixed assets $st *e tagged except land, *$ilding etc.

Fixed Asset
%eceipt

(nspection

Accounting

%ecording the
ode generated ode in FA% if
either through generated
system or manua!!y manua!!y

 'agging of such code

on Fixed Asset

11 AB Sugar Mi!!s "td

Fixed Assets %egister FA%8 :

2hat is FA% 
 
(t is a register sho3ing a!! the permanent assets o3ned by the company0 (t sho3s the 7tyC
6a!ue , !ocation of these assets0 Any de!etion and addition toDof assets are a!so recorded in
this register0

FAR V/s Stock Register 

Stock "egister FA"
'o keep record of goods recei#ed & iss$ed 'o exercise effecti#e control o#er t(e Fixed
Assets (eld * t(e copan

0sed for ites -(ic( are not peranent 0sed for assets -(ic( are peranent in
nat$re
Contains lo- #al$e ites Contains relati#el (ig( #al$e ites

Signi5cance
:

Pro6ides 5na! /a!ue of

&ecti6e ontro! A%O omp!iance FA for 5nancia!
statements

1# AB Sugar Mi!!s "td

ontents of FA%

Asset
"ocation
ode
Asset
*escriptio uantity
n
Asset (n6oice
ategory +o0
Supp!ierQ
ost *epreciatio s +ame
n

*uties Forex
Basic (nsta!!atio (nterest
, Freight (nsurance F!uctuation
/a!ue n harges ost
 'axes s

19 AB Sugar Mi!!s "td

+A" Alteration

FAR 5ill be updated once in a quarter or six months if it is maintained manually or

simultaneously if it is system generated. =t 5ill be updated for the follo5ing reasons :

Sa!e C Pro6iding (nter $nit

*iscarding C *epreciation : Asset
Addition of *emo!ition of
 *epreciation
 'ransfer :
an Asset : Asset : %ate
 "ocation
 *epreciation
 A!! Fie!ds  A!! Fie!ds  Additiona!
Amt0
duty , taxes

 +A" must be Eearly revie5ed for ensuring its accuracy by an appropriate authority in the
+inance Deptt.

1 AB Sugar Mi!!s "td

Physica! /eri5cation :
 Obecti6e: 'o 6erify the actua! existence of the boo@ assetsC
chec@ their condition , pro6ide for adustments shortDexcessC if
any8 of 5xed assets found during physica!0

Physica!
/eri5cation
Po!icy

 'eam Members:

Stores Personne! Physica!

Adustments
 &xpert from 'echnica!  'enure: /eri5cation
re!ating to
*eptt Once in three %eport signed
&xcessDShortag
 Personne! from $ser years by 'eam
e by the
*eptt Members ,
Finance Head
 Personne! from Accounts $nit Head
*eptt
 Finance Personne! from
HO
 (nterna! Auditor
 

1; AB Sugar Mi!!s "td

Physica! /eri5cation
Process
(ntimation by HO personne! to unit head 6ia mai! regarding Phy0
/eri5cation Program sho3ing its dateC team membersC
procedure etc0

-M for3ards the mai! to stores , engg

deptt0

Physica! /eri5cation conducted on the decided date by the

respecti6e team

Based on the Physica!C a 'a@ing %eport must be prepared signed by the team
members and unit head

Such %eport must be compared 3ith the FA% and dierences noted a!ong
3ith reasons

Based on dierences a %econci!iation Statement must be prepared

Such Statement must be presented before higher authority

!i@e FO , &*

After their appro6a! necessary actions to be ta@en ,

adustments to be made in boo@s

1= AB Sugar Mi!!s "td

Physica!
%eport
1/s FA%

*ierences in FA% , Physica! /eri5cation :

Found in Found in
FA% but not Physica! but
in Physica! not in FA%

Ac7uisition
Misappropriat entry not
ion of Asset done in FA%
Asset sent (nsta!!ationD
out on (nspection
2rong &ntry returnab!e Pending
basis Asset recd0
or *oub!e
 'hrough
&ntry (n FA%
inappropriate
Asset has Sa!eD 'ransfer procedure Asset recd 6ia
been entry omitted inter unit
Scrapped in FA% transfer

1> AB Sugar Mi!!s "td

AS =  Accounting for
*epreciation

AS 1K  Accounting for Fixed

Assets

AS 11  Accounting for eects

of change in Foreign
&xchange %ates
Accounting
Standards
re!ated to Fixed AS 1=  Borro3ing ost
Assets

AS #=  (ntangib!e Assets

AS #?  (mpairment of Assets

1? AB Sugar Mi!!s "td

ompanies AuditorQs %eport8 Order A%O8C #KK9

As per paragraph (8 of this orderC an auditor is re7uired to comment on

proper maintenanceC physica! 6eri5cation and maor disposa! in re!ation to 5xed
assets during the 5nancia! year0 'herefore A%O #KK9C re7uires a ompany to :

Maintenance of proper Maor *isposa! of

records sho3ing: Physica! 6eri5cation
Fixed Assets

 *escription of Asset
10  At %egu!ar
 ategori4ation , "ocation
(nter6a!s at !east 10  Proper Accounting
of Asset once in three #0  As per AS  1C if this
years8 aects going
 Purchase *etai!s
#0  %eport preparation concern then its
 *epreciation *etai!s sho3ing materia! proper expression in
discrepancies 5nancia! statements
 %e6a!uationD(mpairment
90  Proper adustment is necessary0
*etai!s of these in the
 *etai!s regards Sa!eC boo@s
*iscarding , *estruction of
Asset
1G AB Sugar Mi!!s "td

Activity Wise Responsibility Chart

2hat  Ho3  2ho  Authori4ed By  %e6ie3ed By %e6ie3 Period 
Budget %efer S!ide Finance hief Financia! &xecuti6e Once in 'hree
Preparation +o0  *eptt O<cer FO8 *irector  )ears
Budget 6Ds
%efer S!ide Finance hief Financia! &xecuti6e At the end of
Actua!
+o0  *eptt O<cer FO8 *irector year
omparison
%efer S!ide Purchase hief Financia! &xecuti6e
Ac7uisition  )ear!y
+o0 ; *eptt0 O<cer FO8 *irector
%efer $nit
Accounting S!ides =  Accounts *eptt0 Head $nit Head -M8 uarter!y
11 *eptt
Asset $nit
%efer S!ide
 'agging , Accounts *eptt0 Head $nit Head -M8 )ear!y
+o0 1#
oding *eptt
%efer $nit
FA% Finance
S!ides 19E Accounts *eptt0 Head  )ear!y
$pdating Manager
1; *eptt
%efer Physica!
Physica! hief Financia! Once in 'hree
S!ides 1=E /eri5cation $nit Head
/eri5cation O<cer FO8  )ears
1?  'eam
A%O , AS %efer S!ide Accounts HO Accounts hief Financia!
 )ear!y
omp!iance 1G , #K *eptt0 *eptt0 O<cer FO8

#K AB Sugar Mi!!s "td

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