The tagging process for a company's fixed assets enables financial managers to carve corporate resources into a series of discrete items with specific tracking numbers. This labeling mechanism applies not only to tangible resources, but often extends to short-term assets -- such as raw materials, work-in-process items and finished products.
Fixed assets include things such as equipment, land, computer hardware and buildings. These resources often call for substantial investments and generally are subject to depreciation -- except land, which typically doesn't lose value over time. Depreciation enables a company to spread the cost of a physical asset over many years. To tag fixed assets, department heads direct fixed-asset managers to set up a working group that includes representatives from corporate functions as diverse as facilities management, production, in-house counsel and regulatory compliance. Working-group members come up with a precise number of tangible resources, asking accountants and corporate treasurers to delve into source documents and confirm that company books match reality. After verifying the fixed-asset physical count has a ring of correctness to it, tangible resource managers divvy up the asset-labeling process. For example, one group may tag buildings and residential establishments, while another team focuses on everything factory-related. Managers also assign tracking numbers to fixed assets -- depending on operational convenience, regulatory conformity, industry practices or the tone from senior personnel.
Management Information Systems
Companies rely on various management information systems to tag fixed assets, ensuring that department heads -- and those in charge of the labeling work -- don't put all operating eggs in the same technological basket. Simply put, top leadership makes sure functional supervisors don't use only one or two programs to count assets, double-check earlier recounts, tag resources and declare mission accomplished. The tools of the trade are diverse and include enterprise resource planning software; database user interface and query programs; project management, review and optimization software; content work flow applications; and fixed-asset financial analysis software.
The cost question is an important part of a company's asset-labeling exercise, and senior executives talk with segment leaders to figure the best and quickest way to perform tasks without breaking the company's bank. Tagging expenses come from various sources, including labor, technological implementation, money the company pays consultants, and time personnel spend away from ordinary work.
Financial Accounting and Reporting
Properly tagging fixed assets leads to a corporate bookkeeping process that accurately records tangible resources, applies depreciation guidelines when necessary, and keeps long-term investment assets in check. Tangible assets are integral to a balance sheet, and depreciation is part of an income statement.