E53.03 - Financial Aspects Asset Management

SIGNIFICANCE AND USE
5.1 Asset management activities should be worthwhile; the perceived benefits should exceed the perceived cost of those benefits. As time progresses, property accountability processes may need to be adjusted with proper recognition to maintain the required framework of internal controls and to avoid abuse. Systematic depreciation of property generally serves to provide a fair presentation of an entity’s property and financial records for decision makers. When conditions change, proper recognition should also occur such as impairments or abandonments. The accountability approach of some items may increase, and accountability approach of other items decrease. Keeping fully depreciated items on the asset records and property management records when they no longer are used as originally intended may be misleading to decision makers and may result in excessive operating costs. Retiring items to administrative control, when appropriate, improves the efficiency and lowers administrative cost without sacrificing other worthwhile internal controls.
SCOPE
1.1 This practice covers guidance as to the proper treatment for accounting and accountability purposes when items are still retained but need to be recognized as impaired or retired to administrative control. This practice is intended to be used in conjunction with Practice E2279, which provides various principles to improve the effectiveness and efficiency of the property management functions. These include the concepts of materiality, best value, reasonable detail, and reasonable assurance and proper reporting. During the life cycle of property management, appropriate action must be taken at the appropriate time to be in conformance with these principles. The objective, on behalf of the owner, is to maintain property accounting records that adequately represent the appropriate book value of the property and for accountability purposes apply the appropriate management and oversight for the proper protection and safeguarding of assets.  
1.2 This practice covers the recognition of the status of property assets that is critical to a fair representation of the entity’s property and financial records. For instances, when items for accounting or property management purposes may no longer serve the purpose that was originally intended, it may be more appropriate to recognize impairments or retire these items for record keeping purposes.  
1.3 Generally, entities for internal controls purposes record, account, and inventory property that meet certain criteria, as defined by the organization, based upon acquisition cost thresholds, expendability, or useful life policies. Accordingly, entities should establish recurring depreciation cycles so that the property eligible for depreciation is fairly and consistently recorded in the entity’s records in accordance with generally accepted accounting principles.  
1.4 The percentage or extent of recognized depreciation is dependent on such factors as the nature of owned property, its useful life, and the frequency of property used in support of business-type activities of the entity.  
1.5 This practice covers the accepted practice of proper record keeping actions when items are fully depreciated for accounting purposes and should be retired from the accounting as well as property management purposes when the asset no longer serves the purpose that was intended but remains on the entity’s premises or continues to be under some form of control.  
1.6 Entities have a responsibility under their internal controls to operate effectively, efficiently, and in a reasonable and responsible manner to provide stakeholders best value as provided in public law, regulations, and generally accepted accounting practices. These responsibilities include responding to internally and externally imposed accounting and accountability changes.  
1.7 This standard acknowledges during the life cycle of assets, decisions have to be mad...

SIGNIFICANCE AND USE
5.1 For agencies and institutions, measuring and managing the LCC of ownership of property may directly result in improved accountability, in the form of cost savings, increased asset utilization, extended asset life, and increased mission effectiveness.  
5.2 For companies, measuring and managing the LCC of ownership of property may directly result in cost savings, increased asset utilization, and, therefore, improved profit margins.  
5.3 Including LCC in the three stages is consistent with Practice E2279 under the reporting principle.
SCOPE
1.1 This practice covers the establishment of a process consensus model for determining the life-cycle cost (LCC) of property assets owned or used by an entity.  
1.1.1 For businesses, these property assets are required to seek to achieve financial returns from producing and selling goods or services, or both.  
1.1.2 For institutions and agencies, these property assets are required to accomplish their primary mission.  
1.2 Real and personal property assets may include capital (fixed) assets and movable assets including customer-supplied assets, rental/leased assets, contract/project direct-purchased assets, or expense items.  
1.3 Asset service lives can be divided into three distinct stages, each with several separate yet interrelated substages: acquisition, utilization, and disposition. These primary stages are not intended to be all-encompassing but are offered as the basis for establishing LCC.  
1.4 This practice is expected to be primarily used for considering the life-cycle cost of personal property, however, the concept can and should be used for various types of assets including personal, real, tangible, and intangible.  
1.5 This practice does not supersede applicable generally accepted accounting principles but is intended to be consistent with the accounting principles particularly in the area of internal controls (see the GAO Green Book) and processes and requirements for estimating. Some life-cycle cost estimating may be required for accounting purposes. (See AS 2501.)  
1.6 This standard does not purport to address all of the safety concerns, if any, associated with its use. It is the responsibility of the user of this standard to establish appropriate safety, health, and environmental practices and to determine the applicability of regulatory limitations prior to use.  
1.7 This international standard was developed in accordance with internationally recognized principles on standardization established in the Decision on Principles for the Development of International Standards, Guides and Recommendations issued by the World Trade Organization Technical Barriers to Trade (TBT) Committee.

SIGNIFICANCE AND USE
5.1 For agencies and institutions, measuring and managing the LCC of ownership of property may directly result in improved accountability, in the form of cost savings, increased asset utilization, extended asset life, and increased mission effectiveness.  
5.2 For companies, measuring and managing the LCC of ownership of property may directly result in cost savings, increased asset utilization, and, therefore, improved profit margins.  
5.3 Including LCC in the three stages is consistent with Practice E2279 under the reporting principle.
SCOPE
1.1 This practice covers the establishment of a process consensus model for determining the life-cycle cost (LCC) of personal property assets owned or used by an entity.  
1.1.1 For businesses, these personal property assets are required to achieve financial returns from producing and selling goods or services, or both.  
1.1.2 For institutions and agencies, these personal property assets are required to accomplish their primary mission.  
1.2 Real and personal property assets may include capital (fixed) assets and movable, durable assets including: customer-supplied assets, rental/leased assets, contract/project direct-purchased assets, or expense items.  
1.3 Asset service lives can be divided into three distinct stages, each with several separate yet interrelated substages: acquisition, utilization, and disposition. These primary stages are not intended to be all encompassing, but are offered as the basis for establishing LCC.  
1.4 This standard does not purport to address all of the safety concerns, if any, associated with its use. It is the responsibility of the user of this standard to establish appropriate safety and health practices and to determine the applicability of regulatory limitations prior to use.

SIGNIFICANCE AND USE
5.1 Improves property accountability including avoiding abuse. Systematic depreciation of property generally serves to provide a fair presentation of an entity’s property and financial records for decision makers. Keeping fully depreciated items on the asset records and property management records when they no longer are used as originally intended may be misleading to decision makers and may result in excessive operating cost. Retiring items to administrative control when appropriate improves the efficiency, lowers operating cost without significantly reducing internal controls.
SCOPE
1.1 This practice covers guidance as to the proper treatment for accounting and accountability purposes when items are still retained, but need to be recognized as impaired or retired to administrative control. This practice is intended to be used in conjunction with Practice E2279, which provides various principles to improve the effectiveness and efficiency of the property management functions. These include the concepts of materiality, best value, reasonable detail, and reasonable assurance and proper reporting. During the life cycle of property management, appropriate action must be taken at the appropriate time to be in conformance with these principles. The objective, on behalf of the owner, is to maintain property accounting records that adequately represent the actual value of property and for accountability purposes apply the appropriate management and oversight.  
1.2 This practice covers the recognition of depreciation of personal property that is critical to a fair representation of the entity’s property and financial records. For instances when items for accounting or property management purposes may no longer serve the purpose that was originally intended, it may be more appropriate to recognize impairments or retire these items for record keeping purposes.  
1.3 Generally, entities formally record, account, and inventory personal property that meet certain criteria, as defined by the entity, based upon acquisition cost thresholds, expendability, or useful life policies. Accordingly, entities should establish recurring depreciation cycles so that the property eligible for depreciation is fairly and consistently recorded in the entity’s records in accordance with generally accepted accounting principles.  
1.4 The percentage and frequency of depreciation is dependent on such factors as the nature of owned property, its useful life, and the frequency of property use in support of business-type activities of the entity.  
1.5 This practice covers accepted practice of proper record keeping actions when items are fully depreciated for accounting purposes and should be retired from the accounting as well as property management purposes when the asset no longer serves the purpose that was intended but still remains on the entities premises or continues to be under some form of control.  
1.6 Entities have a responsibility under their internal controls to operate effectively, efficiently, and in a reasonable and responsible manner to provide stakeholders best value as provided in public law, regulations and generally accepted accounting practices.  
1.7 This standard is limited to property management functions. This standard does not purport to address tax concerns, if any, associated with its use. It is the responsibility of the user of this standard to establish appropriate internal tax guidelines and to determine the applicability of regulatory or statutory requirements prior to use.

SCOPE
1.1 This practice covers the establishment of a process consensus model for determining the life-cycle cost (LCC) of personal property assets owned or used by an entity.
1.1.1 For businesses, these personal property assets are required to achieve financial returns from producing and selling goods or services, or both.
1.1.2 For institutions and agencies, these personal property assets are required to accomplish their primary mission.
1.2 Real and personal property assets may include capital (fixed) assets and movable, durable assets including: customer-supplied assets, rental/leased assets, contract/project direct-purchased assets, or expense items.
1.3 Asset service lives can be divided into four distinct stages, each with several separate yet interrelated substages: budgetary/planning, acquisition, utilization, and disposition. These primary stages are not intended to be all encompassing, but are offered as the basis for establishing LCC.
1.4 This standard does not purport to address all of the safety concerns, if any, associated with its use. It is the responsibility of the user of this standard to establish appropriate safety and health practices and to determine the applicability of regulatory limitations prior to use.

SIGNIFICANCE AND USE
Systematic depreciation of property generally serves to provide a fair presentation of an entity’s property and financial records for decision makers. Keeping fully depreciated items on the asset records and property management records when they no longer are used as originally intended may be misleading to decision makers and may result in excessive operating cost. Retiring items to administrative control when appropriate improves the efficiency, lowers operating cost without significantly reducing internal controls.
SCOPE
1.1 This practice covers guidance as to the proper treatment when items are still retained, but need to be recognized as impaired or retired to administrative control. This practice is intended to be used in conjunction with Practice E 2279, which provides various principles to improve the effectiveness and efficiency of the property management functions including the concepts of materiality, best value, reasonable detail, and reasonable assurance. During the life cycle of property management, appropriate action must be taken at the appropriate time to be in conformance with these principles. The objective is to maintain property accounting records that represent the actual value of property.
1.2 This practice covers the recognition of depreciation of personal property that is critical to a fair representation of the entitys property and financial records. For instances when items for accounting or property management purposes may no longer serve the purpose that was originally intended, it may be more appropriate to recognize impairments or retire these items for record keeping purposes.
1.3 Generally, entities formally record, account, and inventory personal property that meet certain criteria, as defined by the entity, based upon acquisition cost thresholds, expendability, or useful life polices. Accordingly, entities should establish recurring depreciation cycles so that the property eligible for depreciation is fairly and consistently recorded in an entitys records in accordance with generally accepted accounting standards.
1.4 The percentage and frequency of depreciation is dependent on such factors as the nature of owned property, its useful life, and the frequency of property use in support of business-type activities of the entity.
1.5 This standard covers accepted practice as to proper record keeping actions when items are fully depreciated for accounting purposes and should be retired from the accounting as well as property management purposes when the asset no longer serves the purpose that was intended but still remains on the entities premises or continues to be under some form of control.
1.6 Entities have a responsibility to operate effectively, efficiently, and in a reasonable and responsible manner and to provide stakeholders best value as provided in public law, regulations and generally accepted accounting practices.
1.7 This standard is limited to property management functions. This standard does not purport to address tax concerns, if any, associated with its use. It is the responsibility of the user of this standard to establish appropriate tax guidelines and to determine the applicability of regulatory or statutory requirements prior to use.

SIGNIFICANCE AND USE
Contributory value, an alternative model to acquisition cost valuation, provides an economic and logical basis for efficient and cost-effective property management. This value should be the basis for allocating resources and developing and improving systems and processes for the acquisition, control, accounting and disposal of such property.
Contributory valuation is based on the premise that an organization invests in property for the reason that the availability of the property is necessary to the success of the organization, either the accomplishment of a mission or the generation of profit.
The contributory valuation model assumes that the life-cycle cost of acquisition, maintenance, control and disposal of a property asset should be evaluated in the manner of any capital investment; it should yield an appropriate return on assets (ROA) in terms of profit or a contribution to the agency’or institution’mission success.
The use of contributory valuation eliminates the distortions in worth associated with acquisition valuation and encourages a more rational allocation of resources to the management and control of property. This valuation enables an organization to devote the preponderance of its attention and resources to the property that contributes the greatest value to the goods and services produced.
The Property Management Efficiency Factor (described in Section 10) can be used to trend the value added by the property management function and to compare performance with similar organizations.
SCOPE
1.1 This practice covers the assignment of a value to property that provides an economic and logical basis for efficient and cost-effective property management. This value should be the basis for allocating resources and developing and improving systems and processes for the acquisition, control, accounting and disposal of such property.
1.2 While acquisition cost and depreciation of property are useful and appropriate for financial accounting and reporting purposes, this information does not reflect the value of property to an organization or the costs and other damages the organization would incur if the property were lost, damaged, destroyed, or inappropriately released or handled. This financial information is therefore inadequate for property management purposes.
1.3 The degree to which property is controlled and the cost of that control must be reasonable and commensurate with the practical consequences of both a shortage; that is, the property not being available when needed due to loss, damage or destruction; or an overage; that is, maintaining inventories of excess property.
1.4 The valuation of property for the purposes of management and control is to be based upon the risks and costs of shortages and overages as well as the cost of owning property.
WITHDRAWN RATIONALE
This practice covers the assignment of a value to property that provides an economic and logical basis for efficient and cost-effective property management.
Formerly under the jurisdiction of Committee E53 on Property Management Systems, this practice was withdrawn in June 2009. This standard was withdrawn with no replacement due to lack of use and relevancy in the industry.

SIGNIFICANCE AND USE
The calculated cost of property loss and destruction in combination with the cost of overages presents a logical foundation for the development of alternative models which can be used to evaluate the effectiveness of property management systems and provide relevant information to management useful for the distribution of resources to the task of property utilization and control.
The understanding of an organization’loss, destruction and overage cost of inventory is a necessary prerequisite to the development of cost effective systems for the management of movable, durable assets.
The costing model used in this standard assumes that individual categories of property represent a range of realized costs to an organization and that these loss or destruction costs can range from significant to minimal.
The use of overage is a necessary corollary to the model since there can be significant costs associated with the inventory and control of unneeded assets.
SCOPE
1.1 This practice covers the assignment of a value to categories and complete populations of lost or destroyed property assets for the purpose of determining the composite cost of all such losses on a periodic basis. This practice does not address the valuation of individual property assets.
1.2 The reason for assigning a loss or destruction value is to establish an economic basis for the allocation of resources to manage property efficiently and in a cost effective manner.
1.3 The direct cost of lost, damaged or destroyed (LDD) property has little to do with the acquisition, book or market value of such assets. While in many organizations, the value of LDD property is reflected at acquisition cost in the General Ledger accounts this approach is only appropriate for the financial reporting of property assets.
1.4 The calculation of the cost of loss or destruction of property for the purposes of computing a necessary factor to be used in the equation applied under Practice E 2219 is to be based upon the consideration of both the risk of an inventory shortage as well as the benefits of inventory control and overage management.
1.5 The valuation of property for the purposes of management and control is to be based upon the consideration of both the risk of an inventory shortage and benefits of inventory management as contained in this standard.
WITHDRAWN RATIONALE
This practice covers the assignment of a value to categories and complete populations of lost or destroyed property assets for the purpose of determining the composite cost of all such losses on a periodic basis. This practice does not address the valuation of individual property assets.
Formerly under the jurisdiction of Committee E53 on Property Management Systems, this practice was withdrawn in February 2009. This standard was withdrawn without replacement due to its limited use by the industry.