Review of Fixed Asset Management Systems — 2006

For those of you who have never been afflicted with “mountain man spotted
fever,” I will be happy to clue you in. A mountain man (or woman) knows
all and can do it all — we learn everything once, we know all the answers,
we never forget and we do not need any help! Applied to accounting work dealing
with fixed assets and depreciation, we have a full deck of 52 cards, thank you
very much.

Actually, the truth is, I used to be a better (tax depreciation) mountain
man than I am today. In the 1970s, I started out using declining balance, sum
of the year’s digits and straight-line methods for tax depreciation. Bonus
depreciation was easy to deal with. Later in 1981, I had to learn and add the
ACRS rules — the Accelerated Cost Recovery System. Then, in 1987, they
added the Modified ACRS — or MACRS — rules.

My bag of tricks began to bulge. Bonus depreciation had evolved to Section
179, and it only applied to certain types of assets. The listed property rules
could really complicate things. Not to mention that this class life “thingee”
could be very difficult to deal with, even when you could figure out which assets
were in which class or which assets had no class life! Then Congress brought
back bonus depreciation and, well … it seems my mountain man memory went
into permanent OVERLOAD, deserting me at times.

Before, at times, it was bad enough forgetting (small) parts of what I thought
I knew. But in the end, call it 2001 or 2002, I found myself so confused that
I forgot that I knew certain depreciation rules at all. There were more methods,
rules, conventions and special exceptions than I had gray matter to store this
information. Enter “cheat sheets” extracted from seminar material
plus depreciation books and manuals topped off with five or six copies of the
Class Life ADR System, which could be found in different locations strewn on
or behind my desk!

Well, the secret is out. We are officially in an era of smart depreciation
software. Actually, we should call it smart-ER software. Software that is windows-driven
and takes advantage of the environment, with intuitive movement from field to
field via the Tab or Enter key. Software vendors have been quick to recognize
the dilemmas facing accountants. Now, the mountain people can select from drop-down
menus with oodles of depreciation methods and related conventions, enough to
cure the afflicted party of this dreaded ailment.

However, we all know that tax depreciation is not the ONLY reason to buy a
fixed assets program. Auditors and accountants who maintain in-house accounting
systems will quickly tell you that it is not ALL about tax depreciation. It
seems they have to deal with the new detailed requirements of Sarbanes-Oxley,
SOX for short. Tilt! SOX has created a completely new ballgame with respect
to fixed asset accounting needs, or so it seems. SOX was passed to improve corporate
accountability and financial transparency. The mandate for fixed assets accounting:
Public companies must document their inventory of fixed assets and related acquisitions
and dispositions. Likewise, auditors must study and report on the effectiveness
of the system of internal control over fixed assets.

More work, performed by in-house staff and auditors alike, will be required
to document and reconcile changes in fixed assets. For example, SOX requires
that write-offs and related inventory reconciliation and adjustments be performed
on a quarterly basis. Barcode scanning features and inclusion in inventory records
of digital photographs are not on a wish list somewhere, they are necessary
routines to be added to asset management software in dealing to meet the needs
of public companies with respect to SOX implementation.

Wait a minute! What does SOX have to do with me, a small practitioner? The
answer is, “More than meets the eye.” It seems there is this concept
called “Best Practices,” and it is not just for public companies.
While most of the corporate governance reforms inspired by SOX do not directly
apply to private companies, many SOX reforms are becoming benchmarks upon which
financial reporting and corporate governance practices are measured. Now it
seems that everybody is getting into the act, including private boards of directors,
bankers, etc.

So how does all of this affect the small business client down the street?
You know, the one who just wants to maintain a relatively simple fixed assets
system with tax and book depreciation, the latter for his financial reporting.
And let’s not forget the depreciation schedules that are maintained in
the accountant’s office that may not be the cleanest or most accurate.
No serial numbers, no photos, no barcode scanning, no user-defined reports,
etc.

Question: Does the small business client need to document
his system better?

Reply: Yes. If we can document the asset management system
better, we will know more about the inventory of assets on hand — the
inventory will be more accurate. How can we truly determine which asset remains
after a disposal? After all, they were both called computer!

While I am pleased to report that many of the vendors of fixed assets software
available today have done much to relieve the “depreciation rules overload,”
it seems that our newly found documentation concerns (and new-fangled best practices)
require us to look beyond the current depreciation schedule. How can we migrate
depreciation data in fulfilling the call to better document the existence of
fixed assets? Does a fixed assets audit trail exist? Logically, accountants
will need to look to their present software vendor and to others in the marketplace
in order to determine which fixed assets offering will best suit information
reporting needs.

To that end, we offer to you the following reviews of fixed assets software
for 2006. Everyone is invited, especially the mountain men and women who have
not found a cure for their affliction. Peruse and glean. Better to light a candle
than curse the darkness! 

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