Making a comprehensive study of the state of affairs in a particular firm, it is necessary to fully cover all stages of the production process, as well as carefully analyze the assets and liabilities of the enterprise. Since fixed assets represent the largest part of assets, their analysis should be carried out very carefully. In this article we will explain how to correctly analyze the fixed assets of the company.
First of all, let us try to understand why it is necessary to conduct such an analysis. Analysis of fixed assets allows you to understand whether the firm currently has the ability to successfully continue its operations without attracting additional investments, because fixed assets are the most capital-intensive assets. In addition, with the basic means produce the most financial fraud, so that a regular thorough analysis is necessary.
Consider the main aspects of OS analysis:
- Analysis of the acquisition and valuation of the OS allows you to systematize information about when the fixed assets were bought, and whether their initial value was correctly estimated in accordance with the legislation and accounting standards.
- Analysis of the technical condition of fixed assets allows you to assess the status of the OS now and predict the need for their replacement in the future. In addition, the analysis of the state of the OS will also allow to assess the correctness of depreciation, allowing you to identify fraud with the amounts of deductions.
- Analysis of the movement of fixed assets will show how fixed assets moved during the period of their use between different departments of the enterprise, whether the transfer of ownership of an asset from one structural division of the company to another, and so on, was documented. The sale of fixed assets may also include their sale, however, taking into account the logical chain of operations with fixed assets, we consider the sale of fixed assets to be appropriate for the next item.
- Analysis of the reproduction of the OS - another source to identify a variety of violations and frauds. This analysis allows to assess the use of funds and depreciation fund, as well as the reliability of documentary data on the sale of fixed assets at residual value. Analysis of reproduction allows you to understand how effectively the company recovers its main resource, without which no production activity is possible.
Since the period of turnover of the asset is long enough, and can be from two to ten (or even more) years, it does not make sense to conduct an analysis of fixed assets annually. It is advisable to carry out this analysis approximately once every five to seven years - this helps to keep the OS condition under control, to track the occurrence of the need to replace them due to technical condition and wear, and also to minimize frauds with the OS objects.
In order to conduct an analysis of fixed assets, both company employees (accountants, company managers) and third parties, for example, representatives of audit firms may be involved. The audit of the operating system will cost significantly more than checking on its own, but it will give confidence that it was carried out at a high level by highly skilled specialists, and there is no reason to fear that any facts of violations or frauds were not noticed.
Naturally, the analysis of fixed assets should not be “checking for the sake of testing” - according to its results, measures should be taken regarding optimization of operating systems, their updating, changes in the accounting system or other management decisions. The adoption of such decisions is of course the goal of the OS analysis.