The Financial Accounting Standards Board (FASB) Codification is the single source of authoritative Generally Accepted Accounting Principles (GAAP) in the United States. The Codification significantly altered the way accountants and finance professionals refer to and report financial information, establishing an easier-to-follow and more elucidating standard.
The FASB Codification is organized into roughly 90 topics, with each topic containing various subtopics that hinge on characteristics of financial reporting entities, industries, or transactions. Some of these topics can directly be applied to tracking and reporting fixed assets, which is a critical function for all financial accounting and reporting bodies. The management of fixed assets primarily correlates to the areas of depreciation, impairment, and disposal of long-term assets, and it is established under Topic 360, or Property, Plant, and Equipment.
Now, what does this have to do with the fixed asset register tracking solutions? The answer is virtually everything.
The FASB Codification establishes standards for depreciation methods, the estimation of the useful lives of assets, and the recognition and measurement of impairment losses. Such regulations remarkably impact how companies use tracking solutions to manage their fixed assets and assure compliance.
A
fixed asset register tracking solution
is an asset management tool that allows companies to record, track and manage their fixed assets. Given the number of fixed assets that most companies own, it can quickly become a logistical nightmare to keep track of all assets without a centralized system. An asset register tracking solution shows all the necessary information such as date of purchase, cost, depreciation, remaining lifespan, location, and more. This system can also automatically calculate depreciation using the latest regulations and standards and can alert the company when an asset might be nearing the end of its practical lifespan.
Compliance with the FASB Codification requires companies to align their fixed asset register tracking solutions to the standards set. Maintaining up-to-date records of each asset includes accurate tracking of depreciation, identifying when an asset may be impaired, and recognizing when an asset has been disposed.
In the case of depreciation, the FASB Codification mandates a systematic and rational allocation of the acquisition cost of an asset. This principle shifts over its expected useful life, represented as depreciation expense. Different methods for depreciation are prescribed, including the straight-line method, double-declining balance method, and the activity method, among others. Hence, a robust
fixed asset register tracking solution
must be capable of applying these methods and allowing for updates as guidelines change.
To comply with the impairment regulations, fixed asset register tracking solutions must have functionality in place to enable companies to determine if an asset’s carrying amount may not be recoverable. If that happens, an impairment loss should be recognized. Similarly, when a company disposes of fixed assets, it should apply specific calculation and reporting methods to remove the asset from the balance sheet in coherence with the standards laid out by the FASB.
In conclusion, the FASB Codification and fixed asset register tracking solutions are intricately linked. The tool helps businesses adhere to FASB standards, manage their fixed assets efficiently, stay on top of depreciation schedules, and ensure compliance. This system, therefore, acts as a bridge that connects abstract accounting principles with real-world financial management, ultimately reinforcing the significance of rigorous accounting standards.