3.4 Asset register
The asset register is a cornerstone of an asset management framework for entities, no matter what the size of their asset portfolio, in that it keeps asset information as well as an historical record of both financial and non- financial information over each asset's life-cycle for the purposes of:
- asset planning;
- assisting in meeting accounting standards and legislative compliance;
- monitoring performance; and
The asset register is a key to understanding in detail what assets are owned and controlled by an entity and, depending on the complexity of information entered, can be used to determine:
- the likely current condition of assets;
- when assets need to be replaced;
- information required to meet accounting standards and other regulatory requirements;
- asset locations and asset custodians for stocktakes;
- the level and frequency of asset maintenance programs; and
- life-cycle costs by asset, program and business activity.
An asset management strategy, capital budgeting process and a Capital Management Plan are all most effective when populated with accurate and up-to-date information, much of which can be sourced from the asset register.
The functional requirements of an asset register will depend on the size and nature of an entity's activities and asset portfolio and will be configured to be fit for purpose, that is, to deliver performance and accountability measures which are commensurate with the amount and role of assets and the level of asset management activity undertaken within the entity.
The information recorded in, and reports generated from, a comprehensive asset register could include those illustrated in Figure 3.16 below.
Figure 3.16: The asset register framework
Better practice entities with significant asset holdings fully integrate the asset register into their financial management information system (FMIS) to obtain relevant and reliable information for review and decision- making. This helps to ensure that any asset transactions are updated on a real-time basis and that data integrity is maintained between the fixed asset register and other systems including:
- general ledger: the central resource for recording all financial transactions and for generating internal and external financial reports;
- purchasing/accounts payable: processing and management of all asset-related payments whether for capital, operations or maintenance;
- project management: management of all capital projects, recording detailed information on matters such as budgets, acquittal against deliverables, timetables and technical specifications;
- accounts receivable: recording of amounts owed from asset disposals; and
- asset management systems: used to manage operations and maintenance programs.
Typical information flows between the asset register and other FMIS financial modules for an entity holding a large or complex asset portfolio are illustrated in Figure 3.17 below. While the nature of the individual FMIS will be determined by various factors, smaller entities whose asset base is comprised primarily of more ‘standard’ assets may only require a FMIS relating to assets which is commensurate with the level of management and reporting information needed to maintain appropriate levels of accountability. The degree of sophistication for an entity's asset-related FMIS may also be influenced by the average volume of acquisitions or disposals/transfers during the year.
Figure 3.17: Financial management information system relating to assets
In better practice entities that have fully integrated systems, the asset register can be used to manage maintenance programs based upon agreed criteria resulting from an assessment of asset performance indicators such as functionality, operational importance and use. The agreed maintenance and capital programs, and work-orders can also be generated from the asset register for various activities including:
- new works;
- asset replacements;
- routine maintenance; and
- reactive maintenance.
Case Study 3.4 below demonstrates how the National Museum of Australian applies this approach to its asset base. An historical record of life-cycle costs by significant asset or asset class can also be maintained and used as a major input into the planning, budgeting and performance monitoring processes.
Case Study 3.4: Asset register: The National Museum of Australia
The National Museum of Australia (Museum) records information in the asset register to assist facility management activities such as programmed and unplanned maintenance works and asset replacement.
Work-orders are automatically generated from the asset register module for assets requiring scheduled maintenance. Facility management providers (providers) perform maintenance as detailed in the work- orders. To ensure the providers maintain assets to the required benchmark, the Museum undertakes condition assessments of its assets via independent audits. Details of the work including actual costs and condition rating are recorded in the asset register. Unplanned maintenance work is also entered into the asset register and work-orders are generated to advise providers as to work required. Maintenance expenditure is analysed into programmable (scheduled) and non-programmable, such as breakdowns and other non-scheduled maintenance tasks, and monitored closely.
Asset groupings and hierarchies
A cost/benefit analysis will establish the appropriate level for assets to be recorded in the asset register, and how they should be grouped.
Where there are complex assets made up of a number of separate components that are readily identifiable, may be purchased at different times, have different depreciation methods or different useful lives, then it may be appropriate to use asset hierarchies. This would also assist entities to comply with the requirements of AASB 116, that each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item be depreciated separately where useful lives or depreciation methods differ.
Recording significant components of a complex asset separately will assist management in planning for maintenance, replacement, refurbishment and upgrade over an asset's life-cycle.
A master asset record is established for each functional asset and its sub-systems. Components and, where considered necessary, sub-components are used to group assets under the master record. For instance, a sub-component could be used to track capitalised spare parts where these parts are considered a significant part of the relevant functional asset.
If life-cycle costs are attributed to assets at the component level in the asset register, informed decisions as to the efficiency of an asset and its holding cost are more likely to be assessable. The performance of an asset and the cost of holding it can be analysed at increasing levels of detail either at the functional asset level or down through sub-systems to components.
The principles of asset management hierarchies are illustrated in Figure 3.18 below where an asset management hierarchy framework is set out and an example is given as to how hierarchies could be used to track a complex asset such as a leasehold building. The principles are equally relevant, however, to any asset that has a number of components, such as computer networks.
Figure 3.18: The asset management hierarchy
Inventories usually form a unique part of an entity's asset base because of their high turnover rate and low individual value compared to other asset categories. Inventories also usually require a different approach to their management and recording in the asset register compared to other assets. Inventories by definition comprise large quantities of relatively low-value items that are held by entities to meet the uncertainties in demand, supply and movement of the inventory items. Entities which are obliged to carry large inventories often have an inventory management sub-system within the asset register to track the movement of the individual items. Further information on inventories can be found in Section 4.9.