Ghosts in Fixed Assets Ledger

ghosts in fixed asset management ledgersA ghost asset is a fixed asset in a general ledger (GL) that cannot be accounted for because it is physically missing or otherwise rendered unusable.

Everyone has ghost assets in their fixed asset system. These outdated and out of service assets can really affect the bottom line of businesses.

Why do they exist? Because there is a breakdown in most fixed asset management processes. Fixed asset management processes often record the assets in the beginning, and the end, but it loses visibility to the assets in between. To illustrate, let’s break down the asset life cycle events into 5 stages:

  • Acquisition and Record: most fixed asset management processes do a good job in this
  • Utilize assets: transfer, assign: Most fixed asset management processes lose track of this.
  • Report on the usage, condition, and location: Most fixed asset management processes are not capable of doing this.
  • Maintain: Most fixed asset management processes are not capable of doing this.
  • Dispose: Most fixed asset management processes have challenges in tracking which assets are disposed, and when they are disposed, and for what reasons. That’s why ghost assets exist in fixed assets ledger.

To address the gaps in fixed asset management processes, and particularly the problems existing at the disposal stage, we need to start at the beginning of the life cycle.

Here is what Chris Atwell, Director of Tax Services at the CPA firm RSM suggested:

The best way to avoid confusion at the end of the asset lifecycle is to properly identify it at the start. You should physically tag every newly purchased FF&E asset with a code that is tracked by the department that centrally purchased the assets (e.g. building services tracks the coffee machines, and information technology tracks the laptops). The affixed codes should be integrated with the data recorded in the fixed asset system at purchase. So when building services or IT tracks an asset through its lifecycle, they won’t have to hunt through the fixed asset detail to figure out which asset is being disposed of when it goes out of service.

If you would like to understand more about the gaps in fixed asset management processes, and how to address them, you can download our latest white paper.  

If you have any questions, please call us at 866-845-2416.

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