Ledger Review and Analysis
The first step involves Lockwood process-specialists conducting a review of a client's ledger asset list, often referred to as its fixed asset register (FAR). The ledger review entails breaking down the asset register into categories of assets. Identifying the categories enables Lockwood process specialists to categorize ledger assets into classifications such as tangible or intangible assets. As part of this exercise, Lockwood researches entries such as purchase order numbers and project codes, or other line items that may be bundled into asset categories or project numbers, and which might provide a misleading profile of asset counts or values.
Once a ledger has been parsed, it is analyzed in order to determine the best approach for executing the asset count and verification. The ledger review and analysis become the foundation for a series of management reports. These reports define the operating metrics to be used as a guide in the inventory verification stage of the project. They include such categories as asset-value thresholds for defining the set of assets to be counted, the number of assets to be validated, and their location. The ledger review also positions Lockwood for making recommendations on process changes in financial reporting and data collection.
Lockwood generally follows several guiding principles when accessing and analyzing FAR entries. These principles are:
Divide and Conquer
Lockwood's real-world experience has proven that the first hurdle to overcome is the perception that a fixed asset register is so large and cumbersome that the task seems insurmountable, thus stagnating progress in accounting for and verifying assets and/or inventory. In order to reduce the overwhelming nature of the task and to bring order to the process, Lockwood conducts an evaluation of the fixed asset register with the objective of sorting and consolidating the register line items into subsets of assets ordered by category and classification.
Tangible versus intangible
Tangible assets are assets, which can be physically seen or accessed without having to disable, disassemble or damage assets, or significantly disrupt operations. In some cases, embedded devices such as circuit boards, which collectively comprise significant value and could be considered intangible assets, can be verified through electronic polling (or pinging) allowing Lockwood to cross-reference an intangible device to a tangible assets such as a router.
Value versus end of life
By isolating FAR line items, with a remaining net book value, from line items that have reached either end-of-life or have been fully depreciated, Lockwood is able to allocate priorities and emphasis while conducting the verification and asset count.
Greatest value to lowest
FAR line items are organized by greatest monetary value to lowest, thus creating an order of priority and a means to assign a level of effort in verifying assets.
Statutory
Lockwood flags those assets, regardless of value, that have significant material or statutory implications and are considered critical to business operations. This enables Lockwood to identify those assets that impact business process and whose handling impacts proposed process changes.
Lockwood's methodology in asset verification is to break-down a large asset universe into smaller logical and more manageable groupings that can be easily delegated to separate groups of personnel for action. This is called the discovery effort. The first step is to find and identify; trends, quasi-standards and obvious problems such as inappropriate FAR classifications or consolidation of assets with different attributes such as having useful lives and residual values. Obvious problems are resolved prior to moving forward with the verification process. Quasi-standards are catalogued for inclusion into the project plan, while trends are discussed, understood and considered during construction of the verification plan.
Focus on the Reasonable and Feasible
Base on its logical asset classifications, Lockwood defines rules for asset verification using the most reasonable and feasible actions to validate each FAR line item. Each line item is flagged and conditions set that dictate the level and method of effort to be applied to its verification. Conditions include the following:
Levels of matching and logical assumptions
Levels of matching begin with the most obvious - generally focused on exact matching of identifiers such as asset or serial numbers, then migrating to variables such as matching models to other similar model, and so forth. The more the level of matching attributes between physical assets and FAR line items moves away from exact matching, the more Lockwood applies logical assumptions to insure that the matching can sustain audit scrutiny, and be considered reasonable and legitimate.
Pooling of assets with similar attributes
Lockwood often finds that there are no reasonably consistent methods to match assets using linking factors such as asset, serial or model numbers. In those cases, Lockwood resorts to an interpretation of general descriptions that are recorded in a note-like fashion. Often, the asset classification description describes a pooling of assets with similar attributes. For example, the FAR description may simply state "office furniture" with an associated value, or the entry may be associated with a purchase order or project code. In cases such as these, there are alternative validation methods that can be used, such as pooling similar descriptions and making reasonable logical assumptions that link the logical record to a set of physical assets that have been physically verified. This may include reviewing the items' referenced paper trail, such as purchase orders or shipping documents, in order to gather enough detail to make a physical verification of the assets.
On-site insight
Whenever Lockwood conducts an asset validation with less than exact-matching involved, it relies heavily on the insight of certain customer personnel who work in the specific (on-site) locations where the FAR indicates the asset(s) should be located, and who would have some level of: knowledge, access or responsibility for the types of asset(s) being validated. Lockwood selects and enlists this help with the expectation that those personnel are the most likely subject-matter experts on the asset(s) being verified or examined. Lockwood records its findings as notes to the FAR line items and uses those notes to refine its asset search and support the outcome of the asset validation effort.