Fixed asset management practices vary across the spectrum, from basic tracking of fixed asset items to the adoption of an asset life cycle methodology. Best practices are detailed in the ISO 55000 guide, Asset Management, which details standards gaining acceptance in the public and private sectors.
Basic fixed asset tracking requires that the following information be recorded for all fixed assets costing more than an organization’s approved capitalization level (i.e., minimum purchase threshold):
- year of acquisition or construction (the vintage)
- historical cost
- depreciation rate
The sum of this basic information in the fixed asset record should support the general ledger balance for each asset category or account. Once this information is established and deemed reliable, organizations can turn to methodologies geared more specifically to strategies in asset construction, acquisition, or replacement.
ISO 55000 provides guidance and a multistep requirements checklist of best practices in physical asset management. Typically, this information is relevant to government, gas, electricity, and water utilities; road, air, and rail transport systems; public facilities; and process, manufacturing, and natural resource industries
ISO 55000 requires that IT systems used to manage asset data allow for the sharing and retention of information across the organization and throughout an asset’s life cycle. Specifically, IT systems should store data pertaining to asset:
- creation or acquisition,
- maintenance, and
- renewal or retirement and disposal
In order to facilitate compliance with ISO 55000, fixed asset tracking systems and software should be capable of providing an accurate and consistent view of all asset information. Having the appropriate systems in place allows organizations to easily incorporate asset management as a part of strategy implementation. Advanced compliance with ISO 55000 recommends that asset management software has the capacity to provide portals or other methods for outside parties (e.g., engineering firms, maintenance contractors) to access the system so that everyone touching that asset data is interacting with a single database in real time.
Another best practice defined by ISO 55000 assessment methodology is completion of a graphical evaluation of a utility’s strengths and weaknesses in regard to asset management. The components used in this assessment include evaluative questions regarding a utility’s:
- general requirements
- asset management policy, strategy, objectives, and plans
- contingency planning
- structure, authority, and responsibilities
- outsourcing of asset management activities
- training, awareness, and competence
- communication, participation, and consultation
- asset management system documentation
- information management
- risk management processes and methodology
- risk identification and assessment
- use and maintenance of asset risk management
- legal and other requirements
- management of change
- life-cycle activities
- tools, facilities, and equipment
- performance and condition monitoring
- investigation of asset-related failures, incidents, and nonconformities
- evaluation of compliance
- corrective and preventative action
- continual improvement
- management review
Accurate fixed asset information is necessary for utilities to maximize asset value and usage, and to ensure that budgets for fixed assets are spent efficiently and effectively, aligning with organizational strategy. It is worth the investment in time and technology.
For more information on this topic, or to learn how Baker Tilly energy and utility specialists can help, contact our team.