How to Find and Track a Company’s Fixed Assets

Fixed assets are long-term tangible items that businesses own and use to generate revenue. These assets are not intended for sale but support the production of goods or services. Tracking fixed assets is important for businesses to manage their financial health and for investors to assess a company’s value.

Understanding Fixed Assets

Fixed assets are distinguished by several characteristics. They are tangible, expected to be used for more than one year, and acquired for business operations, not for quick resale.

Common examples of fixed assets across various industries include land, buildings, machinery, equipment, vehicles, furniture, and computer hardware. For instance, a manufacturing company’s factory building and the production machinery within it are fixed assets because they are used to create products over many years. Similarly, a delivery company’s trucks are fixed assets as they facilitate ongoing operations, generating income over their lifespan.

Fixed assets differ from current assets. Current assets are liquid, easily convertible to cash within one year, such as inventory or accounts receivable. Fixed assets, conversely, are considered illiquid because they are not readily convertible to cash, and are held for their long-term operational utility.

Locating Fixed Assets on Financial Statements

Fixed assets are reported on a company’s balance sheet, which provides a snapshot of its financial position. They are found under the “Assets” section, often labeled “Property, Plant, and Equipment (PP&E)” or “Fixed Assets.” This classification highlights their role as physical resources essential for operations.

The PP&E line item on the balance sheet presents three pieces of information: gross cost, accumulated depreciation, and net book value. Gross cost represents the original purchase price of the assets, including any costs to get them ready for use. Accumulated depreciation is the total amount by which the assets’ value has been reduced due to wear and tear or obsolescence. Net book value is the gross cost minus accumulated depreciation, representing the asset’s carrying value.

For a detailed understanding of fixed assets, review the notes accompanying financial statements. These notes provide breakdowns of fixed asset categories, explain depreciation policies, and disclose additions or disposals. For public U.S. companies, financial statements and notes can be accessed through the SEC’s EDGAR database or on company investor relations websites.

Methods for Physical Identification and Tracking

Businesses maintain internal accounting records and asset registers to track fixed assets throughout their lifecycle. These records include acquisition date, cost, location, and asset identification numbers. Maintaining accurate internal records is fundamental for effective asset management and financial reporting.

Organizations conduct physical inventories of fixed assets periodically to verify their existence, location, and condition. This process involves tagging each asset with a unique identifier, such as a barcode or RFID tag, for scanning and record updates. Physical inventories reconcile actual assets with recorded information, identify discrepancies, and ensure assets are properly accounted for, benefiting insurance and financial audits.

Specialized fixed asset management software plays a significant role in streamlining tracking. These systems manage the entire lifecycle of assets, from acquisition to disposal, by maintaining accurate records. Such software automates depreciation calculations, tracks maintenance schedules, and provides real-time data on asset location and utilization.

Different departments within a company share responsibility for fixed asset management. Operations teams handle physical asset maintenance, while finance handles accounting and reporting. The IT department manages computer hardware and software assets. This collaborative approach ensures oversight of all fixed assets.

Accounting for Fixed Assets

Fixed assets are initially recorded at their cost, which includes the purchase price and any costs to prepare the asset for use. These costs can include sales taxes, shipping, and installation fees. This initial recording establishes the asset’s historical cost on the balance sheet.

Depreciation is the systematic allocation of a tangible asset’s cost over its estimated useful life. It matches a portion of the asset’s cost with the revenues it generates, reflecting wear, tear, or obsolescence. Land is not depreciated because it has an unlimited useful life.

Two common methods for calculating depreciation are the straight-line method and the declining balance method. The straight-line method allocates an equal amount of depreciation expense to each year of the asset’s useful life. In contrast, the declining balance method is an accelerated approach that records a larger depreciation expense in the earlier years of an asset’s life and smaller amounts in later years.

Fixed assets are disposed of through sale, retirement, or scrapping. The asset and its accumulated depreciation are removed from accounting records, and any difference between the asset’s book value and disposal proceeds is recognized as a gain or loss. Assets may also experience impairment when their fair market value falls below their book value due to physical damage or market changes. When impaired, an asset’s book value is reduced, and an impairment loss is recorded.