How often do you conduct a fixed asset inventory?

Why a fixed asset inventory is performed

The assets of every company represent a highly important balance sheet position, which affects the business result, the ability to obtain loan approvals, and of course reflects the value of the company and the resources it uses to carry out its business activity. Most companies have an unreliable balance of fixed assets (FA) or property on their balance sheet, which is a very poor foundation for making business decisions and managing the company. In practice, it often happens that a company director relies on the book value of assets, which can — but only rarely — represent the real value of the property. By carrying out a physical inventory, you bring fixed assets back to their real state, because during the year some FA has certainly been destroyed, broken, lost, no longer functioning, and so on — in that case, the reason for the absence of the FA is determined and decisions are made either to write off the FA or to recover its value from the person in charge of it or from the employees. In this way, besides adjusting the asset values to reality, you also signal to employees that you really do take care of company property and all available working resources, and that everyone is accountable for the resources they use. Furthermore, as a director you comply with the International Accounting Standards and the Accounting Act, and present the image of a highly professional director to the owners.

The asset balance sheet position

Likewise, the inventory often reveals that some FA are in use but are not recorded in the FA register, i.e. in the balance sheet (usually this concerns the owner's property, which was not purchased directly by the company). In that case, it is best to have such property appraised and include it in the business assets, if that is indeed the case, because this way you present a more accurate picture of the assets and you also incur depreciation costs that reduce profit at year-end. In general, based on a semi-annual or annual inventory, you as a company director can be sure that the asset position on the balance sheet reflects the real situation, and on that basis you can make decisions and plan future investments, new acquisitions, and so on. The asset inventory process itself requires specific actions and documentation — which calls for more detailed explanation, so this topic can be covered in a separate post if there is interest.

How often do you conduct a fixed asset inventory?

Why a fixed asset inventory is performed

The asset balance sheet position

So, if this is completely new information for anyone, an urgent meeting with your accountant is in order.

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