Fixed Asset Verification admin January 20, 2021
Fixed Asset Verification

Customer :

A Mining Company in the African continent.

Business Requirement :

The Entity has designed a Policy for its mine of verifying the Fixed Assets once in 3 years by an external third party in order to ensure the following:

  • Completeness of the Fixed Asset Register (FAR),
  • Existence of Fixed Assets across its Mine Plant and Offices,
  • Establishing Accountability and Ownership,
  • Tagging of Assets.

The said engagement was planned for a period of 3 months by the entity.

Identified Process Challenges :

Ownership for the assets not established, No Granular Asset Class and Asset Description noticed in the FAR, FAR not being comprehensive, Definition of Capital Expenditure (CAPEX) and Operational Expenditure (OPEX) not being clearly followed, Multiple Data Points at an individual department level, Asset Componentization not conducted as per IAS 16 (Property Plant and Equipment), Assets not being tagged on a logical basis Treatment of Insurance Spares not in line with the definitions as per IFRS, Issues identified in Physical Verification (Excess , Short , Duplicate Line items in FAR, Assets under Scrap / Not in Use, Inadequate Asset description) .

Approach and Solution Design :

Identification of Ownership for the Assets– Performing face to face user discussion to showcase the existing FAR and understanding the assets applicable to the respective HOD’s, Perform Physical Verification of Assets based on the SPOC’s (Single Point of Contact) identified, Finalize the Assets listing derived from FAR, Obtain confirmation from the respective HOD’s and SPOC’s identified, Perform Physical Verification of the Assets based on the listing finalized at each department level, Ensure the assets are tagged using a logical tag code by obtaining a consensus from the Management Personnel, Draft SOP for the Entity for Fixed Asset Capitalization, Issue the Fixed Asset Verification Report signed by the Engagement team and the Client.

Business Benefit and Result :

The Engagement team had provided with two reports namely a Fixed Asset Verification Report and a SOP for the Fixed Asset Capitalization and Verification indicating the following:

A) Fixed Asset Verification Report:

Cleansed FAR, New Assets identified during verification, Assets Identified as Short, Assets Identified as Excess, Duplicate Entries noted in FAR, Assets stated as Scrap / Not in Use, Assets Description to be changed.

B) Drafted SOP for the Entity for the Fixed Asset Capitalization and treatment of special cases:

A SOP was drafted for the Entity covering aspects like Treatment of Insurance Spares , Categorization of Capex and treatment for Opex , Establishing Criteria for Asset componentization in line with IAS 16, Depreciation and related aspects.