2009 Review of Fixed Asset Management Programs

From the Dec. 2009 Issue

Professionals who manage corporate accounting and tax compliance know the intricacies of depreciation. And while individual filers may have need for asset depreciation and business expense calculations for their Schedule C businesses, their asset bases are generally very small and change infrequently, making easy work of managing them. But more formal businesses, especially as they grow, increasingly find themselves in more difficult territory as they acquire more business assets and encounter different disposal needs multiple times throughout the year.

While there are, no doubt, many professionals out there who have become experts at managing asset depreciation using Excel spreadsheets, you may want to ask yourself, “Is this really what you got into the profession to do?” Once upon a time, asset management wasn’t very complex: Simple straight-line depreciation was easy to handle. But over the past 20 or so years, depreciation methods have grown increasingly challenging, with the need to maintain multiple books per asset, sometimes as many as six or more, when you consider available methods for federal tax, GAAP, AMT, ACE, E&P and individual states.

While these additional methods can prove beneficial to companies, for spreadsheet users, they result in increasingly complex spreadsheets that require more and more time. Combined with ever-changing laws and annual changes to bonus depreciation and Sec. 179 rules, trying to use Excel to manage client assets can snowball into hours spent tweaking calculations and macros; time that probably won’t be billed at full value or, at the least, could be better spent on the golf course.

Fixed assets are often the most substantial investments that businesses make, and their valuation and the tax benefits that come with prudent depreciation strategies is critical to developing sound financials, business planning, income taxation, and state and local property taxes. This is why effective asset management for companies with more than even 20 to 30 assets requires a system that includes all of the most recent legal changes, and that automatically makes computations as different treatments are applied. This enables users to quickly see which available methods are the most beneficial to the business in the short and long term, with the ability to see the effects of those elections and make projections over multiple years. The asset management programs in this review all offer variations on these features, with some essentially working as extensions of spreadsheet systems, while others offer much more powerful database structures.

But in addition to easing the processes of depreciation calculations, many of today’s asset management systems also offer a wide range of other tools that can be valuable to either a public accountant offering services to multiple clients or to businesses that manage their asset accounting in-house. While most people may instinctively think of financials and taxes when they think of the word accounting, the heart of the word also encompasses the important concept of accountability. This means not just determining what an asset’s book value is, but also having answers to the following questions: Where is it? What shape is it in? And who has it?