2007 Review of Fixed Asset Systems

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From the December 2007 Issue

Every business, large and small, has assets that help them perform their work or deliver the services they provide their clients. Whether a company is retail oriented, a restaurant, manufacturing or service-based, things like computers, machinery, vehicles and even real estate are crucial to operations and are entitled to special treatment under tax law depending upon the type of item, the industry and other factors.

Understanding how and why things depreciate in their value to a company is important, especially when determining the best available depreciation strategy for a particular asset. After all, fixed asset management is as much an art as it is a science because businesses and their accounting professionals often have options on how to treat an item. Once upon a time, about 15 years ago, the process was perhaps simpler in concept (there were fewer special treatments and conventions), but since the work was done manually on spreadsheets (or on paper) it was much more difficult to manage even smaller numbers of business assets.

But several programs are available now, generally database-driven systems with strong calculation capabilities that greatly ease the entire asset management process, from acquisition through disposal. For asset life events, the systems make it easy to split, unsplit or combine assets, while also allowing revaluation, partial and mass dispositions, and like-kind exchanges. Assets can also be grouped into a business’ subsidiary units or by geographic location or cost center. To comply with federal and state regulations, and to assist in accurate business valuation, asset management systems also help maintain clear and accurate documentation and audit trails, showing how assets have been depreciated and what methods were used. But these are mostly organizational functions.

Determining the depreciation treatment that provides the best overall financial benefit to the business, and that follows GAAP and FASB conventions, is the “meat and potatoes” of asset management programs. And it’s a complex process, especially considering that every taxing entity and other parties allow and require different treatment of assets. To manage them differently, asset management systems allow users to maintain multiple books for assets, always including federal, book, AMT, ACE and state, and often also allowing multiple customized books.

Programs also help the user select the appropriate classification for an asset, including whether it is an asset of a farm, Indian Reservation, Indian Farm or governmental entity, which have different allowances than regular assets. After determining the class, these programs help with application of depreciation methods, including MACRS and ACRS rules, Sum-of-the-Years’ Digits, Listed Auto, Amortization, Straight-Line, Units of Production, Declining Balance and eligibility of bonus depreciation under Section 179. For this review of asset management programs, the following criteria were addressed:

• Navigation/Ease-of-Use. This is critical to any software program, but especially for those dealing with functions as complex as asset management.
• Management Features. Here we address the books and depreciation methods supported by each of the programs, examine how the system performs general functions and discuss additional productivity-enhancing features within each system.
• Integration. Fixed asset depreciation management may not be only a tax function, but it can be an important part of the reporting process for many entities. Many advanced systems offer integration with professional tax preparation packages, as well as with GL and write-up programs, allowing users to easily transfer data between these various systems without manual re-entry or complex processes.
• Reporting. Government entities want forms and worksheets, accountants need journal summaries, and clients benefit from knowing what their business’ assets are worth to them … and when/how they can plan for disposition and replacement. Therefore, asset management programs provide various output options like PDF and export to Excel, while some of the programs in this review even offer fileable versions of federal and state forms.
• Help/Support. The Help and assistance features within a program are crucial. And additional resources such as online support centers can greatly ease new users as they transition into a new program, as well as benefit other users looking for guidance on specific functions. This section also identifies whether tech support is included with a system’s pricing or requires additional charges.
• Summary. This final section gives an overview of each of the programs’ primary features and strongest functionality areas, and it identifies the types of users most likely to benefit from the system.

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