What is an asset register?
Asset management is a crucial aspect of any business, ensuring that all company assets are accounted for, maintained and utilised efficiently. Whether you’re managing a single property or a vast portfolio, the importance of having accurate and up-to-date information at your fingertips cannot be overstated.
One essential tool in asset management is the asset register, a comprehensive tool that provides property and asset managers with detailed information on the assets they oversee.
In this post, we will explore what an asset register is, why it is essential for property and asset managers and the different types of asset registers you may encounter and use to streamline operations, reduce risks and ultimately enhance the value of the assets under your care.
What is an asset register and why is it important?
An asset register is a comprehensive record that catalogues all the assets owned by a business or organisation. It includes key details for each asset, such as a description, location, purchase date, initial cost and current value. The primary purpose of an asset register is to keep track of the company’s assets, ensuring they are properly managed and accounted for.
There are a number of types of asset register, including a fixed asset register, a register for IT equipment as well as registers for digital assets.
However, the value of an asset register is in its role as a dynamic tool that plays a crucial part in the day-to-day operations and long-term planning of a business. By maintaining an up-to-date asset register, organisations can ensure that their assets are properly managed, maintained and accounted for.
Why is an asset register important?
Asset tracking – An asset register allows businesses to monitor the location and usage of their assets, preventing loss and ensuring effective utilisation.
Financial management – an asset register provides accurate data for financial statements and audits, ensuring the true value of assets is reflected in the company’s records.
Depreciation tracking – an asset register facilitates accurate calculation of depreciation, impacting tax liabilities and providing a realistic view of financial health.
Maintenance management – An asset register helps schedule and track maintenance activities, ensuring that assets are serviced and maintained on time, extending asset lifespan and minimising downtime.
Asset valuation – an asset register helps businesses assess the value of their assets at any given time, providing crucial data for insurance claims or when considering the sale of assets.
Compliance – an asset register ensures adherence to regulations including IFRS/SORP by providing a clear, auditable record of assets, reducing the risk of non-compliance.
Different types of asset registers
The type of asset register an organisation uses depends on the size of its operations, the volume and complexity of its assets and specific management needs. These registers can exist in various formats, ranging from manual paper records and spreadsheets to specialised asset management software. Depending on the nature of the assets, registers can be categorised as follows:
Fixed asset register
A fixed asset register tracks physical, long-term assets that are integral to business operations. This includes assets such as buildings, machinery, vehicles and equipment. These assets are typically high in value and have a long useful life, often spanning several years.
IT asset register
An IT asset register is specifically designed to manage an organisation’s technology-related assets. This includes hardware like computers, servers, networking equipment and mobile devices, as well as software licenses and digital infrastructure. An IT asset register helps organisations keep track of these assets, manage software licenses to ensure compliance, plan for upgrades or replacements and protect against cybersecurity risks by maintaining an up-to-date inventory of all digital assets.
Digital asset register
A digital asset register helps organisations manage digital assets such as digital media files, intellectual property, patents and trademarks. This type of register is particularly important for businesses involved in media, marketing, technology and any industry where digital content or intellectual property forms a significant part of the business model.
What should be included in an asset register?
An asset register should contain comprehensive and accurate information about each asset within an organisation. The key details to be recorded include:
Asset description – A clear name and description of the asset, outlining its purpose and features.
Asset ID – A unique identification number or code for tracking and consistency.
Location – The physical or digital location of the asset, such as its building, room or storage system.
Purchase date – The date the asset was acquired, essential for tracking its age and planning upgrades.
Cost – The original purchase price, including any additional costs like taxes and installation.
Depreciation – The method and rate of depreciation applied, important for financial reporting and tax purposes.
Current value – The asset’s current book value, reflecting depreciation and used for financial analysis.
Maintenance records – Logs of maintenance activities, including dates and types of maintenance performed.
Responsible person – The individual or department responsible for managing and maintaining the asset.
Depreciation methods
Depreciation is the process of allocating the cost of a tangible asset over its useful life, reflecting the wear and tear, deterioration or obsolescence of the asset over time. Common depreciation methods include:
Straight-line depreciation – The asset’s cost is spread evenly over its useful life, resulting in a consistent annual depreciation expense. This method is ideal for assets that provide consistent utility over time.
Declining balance depreciation – This method applies a higher depreciation rate in the earlier years of the asset’s life and decreases it in later years. It’s an accelerated depreciation method, meaning the asset loses value more quickly at the beginning of its life. This method is often used for assets that rapidly lose value, such as technology or vehicles.
Units of production depreciation – This method bases depreciation on the asset’s usage, activity or units produced rather than the passage of time. This method is suitable for assets whose wear and tear are more closely linked to usage rather than age.
Sum-of-the-years’-digits depreciation – This accelerated method depreciates an asset more quickly by summing the digits of its useful life and applying them to calculate depreciation. For example, with a 5-year asset, the digits 1+2+3+4+5 total 15. In the first year, 5/15 of the asset’s cost is depreciated, 4/15 in the second year, and so on. It’s ideal for assets that lose value rapidly early on.
Challenges of keeping an asset register accurate
Maintaining an accurate asset register is crucial but presents several challenges:
Recording and updating details: Ensuring all asset information is correctly recorded and updated regularly is essential. Inaccurate data entry or delays in updates can lead to discrepancies, making it hard to track asset value and location. Regular audits and strict data management practices are key to addressing this issue.
Tracking asset movements: Monitoring asset movements between locations, departments and sites can be complex and time-consuming. Without real-time tracking systems or clear protocols, assets may become misplaced or lost, causing inefficiencies and financial losses.
Maintaining maintenance records: Keeping up-to-date maintenance and repair records for numerous assets can be challenging. Inaccurate or incomplete records may result in missed maintenance schedules, unexpected breakdowns and higher costs.
Calculating depreciation accurately: Applying the correct depreciation method requires careful consideration. Errors in depreciation calculations can lead to inaccurate financial reporting and potential regulatory issues.
Compliance with regulatory standards: Adhering to regulatory requirements such as IFRS or SORP is crucial for financial transparency. Ensuring compliance can be difficult, especially with changing regulations or operations across different jurisdictions.
Integrating with business systems: For accurate and up-to-date data sharing, asset management software must integrate with other business systems like financial software and ERP tools. Lack of proper integration can create data silos, leading to inconsistencies and errors in the asset register.
Contact MRI Software
To find out more about how MRI Software’s comprehensive fixed asset management solution can meet the audit and depreciation requirements of both the private and public sectors, request a demo or call us today on +44 (0)20 3861 7100.
