Fixed Asset Policy

Fixed asset policy for a company should be a guiding instrument for accounting and management. The policy doesn't have to an elaborate work, but should be thoughtful of the outcome needed for fixed asset information

A policy should include the following:

  • Definition of what a fixed asset is
  • Who keeps the fixed asset records
  • What the fixed asset records should contain (in summary)
  • How depreciation methods are determined
  • Procedure for new asset acquisitions
  • Disposal methods for assets
A fixed asset should be defined, especially by dollar amount. If the minimum amount of an asset is $1000 to be recorded as a fixed asset, then that should be stated. Often this policy of a minimum is guided by tax laws and accounting standards. The owner or manager of a business may want to track almost everything, this is not unusual. Thought should be given to the cost of tracking assets over time, and if it is really worth tracking assets that of lower value.

The department that is responsible for the record keeping should be mentioned, along with what the records should contain. Proper acquisition and disposal methods should be outlined. If the engineering or maintenance departments are to fill out forms for acquisition, disposal, or movement of assets, this should be noted.

The policy for determining the depreciation method should be mentioned. At this high level document level, detail is not necessary, but should guide the reader as to how to acquire the method to be used. Often, the deprecation method is determined by outside accounting firms or tax departments. Once a method is determined, it is usually not changed, unless the tax laws change.

The policy is a high level document that guides the organization. More specific work instructions and forms that need to be filled out for asset moves, etc should be developed in addition to the policy.