Fixed Asset Management Process in Enterprises

1. What is Enterprise Asset Management?

Enterprise asset management is the process of managing and monitoring, protecting the assets of the enterprise, including both tangible and intangible assets. The main goal of enterprise asset management is to ensure that all assets are used efficiently and protected from risks and damages.

Managing the process of using enterprise assets is an important task, requiring meticulous management and the use of appropriate asset management tools to ensure that the organization's assets are used effectively and contribute to increasing competitiveness in the market.

2. Fixed Asset Management Process

2.1. Step 1: Establish an Asset Management Process Plan

The fixed asset management process typically begins with submitting an Asset Registration (AR) application for approval. Anyone with the authority to register fixed assets must prepare an Appropriation Request (AR) form and provide detailed information about the proposed fixed assets. This registration form will then be sent for review and approval.

2.2. Step 2: Asset Acquisition and Recording

Fixed assets can be categorized into self-constructed assets and purchased assets. After AR is approved, the next step usually involves placing an order, especially in the case of purchasing assets from suppliers. This purchase order contains information about the assets, quantity, prices, and terms and conditions of the sale.

After the assets are delivered from the supplier, they are usually entered into the organization's accounting system. The process of entering assets into the accounting system can be done by entering asset invoices, creating journal entries to record assets in the accounts payable account, or using the purchasing module of the management system.

In addition, assets can also be directly entered into the fixed asset management system.

2.3. Step 3: Utilization of Fixed Assets

• Transfer fixed assets to users: Clearly identify users' responsibilities and authority related to fixed assets. Typically, a receipt voucher can be used to document the transfer, including information about the recipient, date of receipt, description of fixed assets, etc.
• Provide guidance on the use and maintenance of fixed assets: Users need to be instructed on how to use and maintain fixed assets to ensure that they are operated and preserved correctly.
• Monitor the status of fixed asset usage: This monitoring helps assess the efficiency of fixed asset usage, make decisions on maintenance, upgrade or replacement, and ensure that fixed assets meet the organization's requirements and purposes.

Depreciation of Fixed Assets (FA) is the process of allocating the value of fixed assets into depreciation expenses over their useful life.

Common methods for determining depreciation include straight-line depreciation, declining balance depreciation, units-of-production depreciation, etc.

At the end of each period (month/quarter/year), you need to allocate depreciation from the initial asset value and record it in the accounting records. This can be done by reducing the initial asset value by the corresponding depreciation amount for that period.

2.5. Step 5: Disposal and Elimination of Valueless Assets

When a fixed asset is no longer usable, becomes obsolete, or cannot be repaired, it is usually disposed of or eliminated. When a fixed asset reaches the end of its useful life, it is no longer depreciated.

There are many methods to dispose of or eliminate fixed assets, including abandonment, sale, exchange, or disposal. The disposal process will record the financial impacts in the financial statements and business operating results.

Any difference between the book value (asset value in the accounting records) and the realization value (asset value when disposed of) will be recognized as profit or loss in the business operating results.

2.6. Step 6: Fixed Asset Inventory

The fixed asset inventory process includes the following steps:

Plan fixed asset inventory: Determine the timing, frequency, scope of inventory, and prepare inventory documents and tools.