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Fixed Assets Policy

What should the min value for items be for a Fixed Asset Policy?

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We are designing the companies first FA policy and there is some debate about the min value for items to be asseted.

The company has had a loose policy of £100, but hasn't specified if this is a single item value of if 10 items at £100 each could be asseted - I believe that materiality should play a large part in deciding if items should be capitalised or not which has opened a debate about what the materiality should be for a £25m+ company...any suggestions grately welcomed

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By paul.benny
05th Dec 2019 11:55

Take a step back from trying to fix a monetary value and think about the other processes around fixed assets:
- approval of capex, including potentially an investment appraisal
- maintaining a detailed asset register
- calculating depreciation
- doing periodic asset verification
- recording and accounting for asset disposals and write-offs

Does it make sense to do all of these things for £100 or even £500 items?

I'd be thinking of £2,500, maybe more, for a company of your size.

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Replying to paul.benny:
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By RebeckaJ
05th Dec 2019 12:07

Hi and thanks for your response...with the exception of approval of capex we already maintain a detailed asset register which calculates all the depreciation at the different rates etc plus periodic asset verification (asset audit). The use of a labeller is invaluable and reduces the time for such audits.

The company has grown so quickly, 83% just 2 years ago and 35% in the last year, so the goal post has moved quite a bit from when it was a £9m company! When I joined the company items for as little as £35 were being capexed...!

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By WhichTyler
05th Dec 2019 12:50

My problem is that there are lots of desirable items (phones, laptops) that fall below most capitalisation limits (as individual items) but should still be tracked as it rankles when staff just wander off with them...

A separate IT asset register is possible, but duplication in some cases...

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Replying to WhichTyler:
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By paul.benny
05th Dec 2019 14:49

Agree with your point.

From an internal control perspective, the IT function/person responsible should in any case be managing devices for updates, security, licenses. That's probably more effective than any control the finance function can exercise.

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Replying to WhichTyler:
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By JDBENJAMIN
05th Dec 2019 14:59

Why not capitalise such items and depreciate them 100% in the first year. That way they are in the asset register but don't require a depreciation calculation.

BTW, I never capitalise anything less than £1,000 for even the smallest client. For one your size, I would be looking at a threshold of £5,000 minimum.

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By Moonbeam
05th Dec 2019 15:48

It reminds me when I was temping around merchant banks years ago and the bookkeeper in one bank was capitalising coat hangers because no-one had explained about materiality etc.

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RLI
By lionofludesch
05th Dec 2019 15:58

There's no single answer for this.

As long as your policy is reasonable, you can do as you wish.

In judging reasonable, I'd be looking at turnover, profit and amount of capex.

I deal with mainly small clients - some would say very small - I generally wouldn't capitalise anything below £200. For a larger client, I might go as far as £500. I wouldn't be comfortable with more than that. After all, it can be an advantage to have capex rather than a charge against profits.

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By Martin Schneider
06th Dec 2019 15:15

I have a client who uses the Fixed Asset Rgister also as PAT testing register. So anything electrical goes on here e.g. kettle, toasters, desk fans and so on.

Yes it's extra work (a little) for the bookkeeper but then they have a proper list of equipment that needs testing.

as a bonus, of course, if the engineer isn't able to test an item because it's been scrapped then the bookkeeper will know this. Anything not PAT-tested each year gets scrapped off the FAR.

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