Fixed assets and key locations are important for which of the following categories?

Fixed asset management can be complex, especially for global enterprises or companies with large inventories — like a car rental business or manufacturing multinational.

Small organizations may use spreadsheets or enterprise resource planning (ERP) tools for asset tracking. However, manual data entry is prone to error. It can also be a slow method for staying on top of fixed asset inventory, when fleets of vehicles are moved between locations or the technology is complex.

In her asset management blog, Watson IoT Content Director Sarah Dudley outlines a common scenario: “You have five vehicles. Maybe you have a notebook where you keep track of when each needs an oil change, new wiper blades or a new set of tires…Now you have 500 vehicles. You’re beginning to see the issues that start to arise. If only you had a database where you could easily track this information with no risk of it getting lost or misplaced. This is the purpose an asset management system serves.”

Asset tracking software and management solutions offer a reliable way to oversee fixed assets. Included are features like location tracking, work order processing and audit trails.

Asset management software

Smaller operations may benefit from a computerized maintenance management system (CMMS). The automation software assists with scheduling, management and reporting of maintenance activities. Features include handling workflows, resourcing and routing, operating and repair guidance, and reporting and auditing.

For large operations, an enterprise asset management system like IBM Maximo provides a central platform for managing all fixed assets. It integrates asset data from across the asset lifecycle: acquisition, operations, maintenance, depreciation and renewal or replacement.

With a complete view, organizations gain insight into their complex asset environments. They’re better informed to manage asset health. Features and workflows help them optimize management tasks and reduce downtime. Teams also have an enterprise view of safety and environmental controls, the better to address issues and risks.

IoT and AI

The Internet of Things (IoT) offers deep insights and enables greater control of fixed assets. IBM Watson IoT software, for example, correlates data from sensors and devices to provide timely visibility into asset health and performance. It enhances asset management by analyzing status, assessing value and risk, and anticipating failures.

AI uses machine learning to gauge asset status and enable predictive maintenance. The technology gathers asset data (from sensors, telemetry, work orders, even weather events) and uses algorithms to see patterns or trends and develop forecasting models. The information, coupled with predictive scoring, enables the system to prescribe preemptive tactics or strategies.

Blockchain

Blockchain is a secure, shared ledger that records every transaction in a business network. In terms of fixed asset tracking, the technology helps:

• Establish provenance of equipment and services across the asset supply chain
• Record safety-related transactions such as permits and incidents
• Provide an audit trail across the network
• Provide oversight into damage and warranty related claims

“A blockchain means that all the activities that have been performed on an asset are verified and create an accurate record for asset managers to use,” says IBM lead product architect Russell Bee in his asset management blog. “They use these records to analyze performance, risks and to make strategic decisions about their equipment as part of their planning cycles.”

When to Classify an Asset as a Fixed Asset

When assets are acquired, they should be recorded as fixed assets if they meet the following two criteria:

1. Have a useful life of greater than one year; and

2. Exceeds the corporate capitalization limit.

The capitalization limit is the amount of expenditure below which an item is recorded as an expense, rather than an asset. For example, if the capitalization limit is $5,000, then record all expenditures of $4,999 or less as expenses in the period when the expenditure is recorded.

Fixed Asset Classification Criteria

If an asset meets both of the preceding criteria, then the next step is to determine its proper account classification. The most common classifications used are noted below.

Buildings

The buildings account may include the cost of acquiring a building, or the cost of constructing one (in which case it is transferred from the Construction in Progress account). If the purchase price of a building includes the cost of land, apportion some of the cost to the Land account (which is not depreciated).

Computer Equipment

The computer equipment account can include a broad array of computer equipment, such as routers, servers, and backup power generators. It is useful to set the capitalization limit higher than the cost of desktop and laptop computers, so that these items are not tracked as assets.

Construction in Progress

The construction in progress account is a temporary one, and is intended to store the ongoing cost of constructing a building; once completed, shift the balance in this account to the Buildings account, and start depreciating it. Besides the materials and labor required for construction, this account can also contain architecture fees, the cost of building permits, and so forth.

Furniture and Fixtures

The furniture and fixtures account is one of the broadest categories of fixed assets, since it can include such diverse assets as warehouse storage racks, office cubicles, and desks.

Intangible Assets

The intangible assets account includes non-physical assets, examples of which are trademarks, customer lists, literary works, broadcast rights, and patented technology.

Land

Land is the only asset that is not depreciated, because it is considered to have an indeterminate useful life. Include in this category all expenditures to prepare land for its intended purpose, such as demolishing an existing building or grading the land.

Land Improvements

Land improvements include expenditures that add functionality to a parcel of land, such as irrigation systems, fencing, and landscaping.

Leasehold Improvements

Leasehold improvements are improvements to leased space that are made by the tenant, and typically include office space, air conditioning, telephone wiring, and related permanent fixtures.

Office Equipment

The office equipment account contains such equipment as copiers, printers, and video equipment. Some companies elect to merge this account into the Furniture and Fixtures account, especially if they have few office equipment items.

Software

The software account includes larger types of departmental or company-wide software, such as enterprise resources planning software or accounting software. Many desktop software packages are not sufficiently expensive to exceed the corporate capitalization limit.

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