Fixed Asset Policy Adv

8/6/2019 Fixed Asset Policy Adv

http://slidepdf.com/reader/full/fixed-asset-policy-adv 1/23

Fixed Asset PolicyPresented & Prepared by:

Internal Audit Department Sindh Agriculture & Forestry Workers Coordinating Organization

Credit & Enterprise Development



SAFWCO-CED [FIXED ASSET POLICY]

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Context:

Page no:

Introduction 03

Scope 03

Objective 03

Definitions 04

Statutory and Regulatory Frame Work 06

Responsibility 06Classification of Fixed Assets 07

Identification of Fixed Assets 08

Fixed Asset Register 09

Capitalization Criteria 11

Maintenance Plans 11

Financial Management 12

Funding Of Capital Projects 13

Financial Disclosure 14

Accounting For Fixed Assets 15Safekeeping of Assets and Internal Control 16

General Requirements 17

Valuation of Assets 18

Insurance of Assets 19

Depreciation of Fixed Assets 20

Carrying Values of Fixed Assets 21

Supplemental Topic 22

Annexure




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IntroductionThis Policy document is deemed necessary in order to facilitate the effective management, control and

maintenance of all assets belonging to the SAFWCO-CED. This document is subject to future changesprescribed by Board of directors or CEO.

ScopeThis policy will be applicable to all the staff of the SAFWCO-CED.

Objective

The objective of this Policy is to ensure that assets are properly managed and accounted for by:

• The accurate recording of essential asset information;

• The accurate recording of asset movements;

• Exercising strict physical control over all assets;

• Financially substantiating and accounting of assets as per the Financial Statements;

• Providing accurate and meaningful management information in conjunction with the other

• Compliance with Management’s Accounting Policies;

• Effecting adequate insurance of all assets and assist with insurable interest where possible and;Maintenance of Management’s Asset




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DefinitionsFixed assetA fixed asset is defined as a tangible item of property, plant or equipment held by a SAFWCO-CED for

use in the productions or supply of goods or services, for rental to others, or for administrative purposes,and which is expected to be used during more than one reporting period (financial year).A fixed asset is thus an asset, either movable or immovable, under the control of the SAFWCO-CED,

and from which the SAFWCO-CED reasonably expects to derive economic benefits, or reasonably

expects to use in service delivery, over a period extending beyond one financial year.Assets include land, buildings engineering works, machinery, equipment, vehicles, office furniture and

equipment, but would exclude minor items that are generally regarded as expendable, even though their

useful lives may extend beyond one year, e.g. pens, files and note pads.An asset held under a finance lease, shall be recognized as a fixed asset, as the SAFWCO-CED has

control over such an asset even though it does not own the asset.

Property, plant and equipment are tangible assets that:a) Are held by a SAFWCO-CED for use in the production or supply of goods or services, for rental to

others, or for administrative purposes, andb) Are expected to be used during more than one period.

Investment propertiesProperties that are acquired for economic and capital gains. Examples are office parks and undevelopedland acquired for the purpose of resale in future years.

AssetsAssets utilized in normal operations. Examples are plant and equipment, motor vehicles and furnitureand fittings.

DepreciationSystematic allocation of the depreciable amount of an asset over its useful life.

Depreciable amountCost of an asset, or other amount substituted for cost in the financial statements, less its residual value.

Useful lifea) The period of time over which an asset is expected to be used by the SAFWCO-CED, or

b) The number of production or similar units expected to be obtained from the asset by the SAFWCO-

CED.




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Cost• The amount of cash or cash equivalents paid or the fair value of the other consideration given to

acquire an asset at the time of its acquisition or construction.

• The cost of acquisition will include all expenditure needed to bring the asset at the conditionand position for its intended use which usually include:

• Purchase cost (less any discounts given)

• Delivery cost

• Installation cost

• Professional fees, e.g. engineering fees

• Site development fees

Residual valueThe net amount that the SAFWCO-CED expects to obtain for an asset at the end of its useful life afterdeducting the expected costs of disposal.

Fair valueThe amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s

length transaction.

Recoverable amountThe amount that the SAFWCO-CED expects to recover from the future use of an asset, including its

residual value on disposal.

Capital budgetPlan of proposed capital expenditure and the means for financing them, and the timing.

Capital budgeting:The process of choosing investment projects by considering the present value of cash flows and deciding

how to raise the funds required for the investment.

Capital expenditure:Expenditure to acquire or improve fixed assets.

Finance Lease: Finance lease is a lease that transfers substantially all the risks and rewards

incident to ownership of an asset.




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Operating Lease: The lease agreement in which ownership does not transfer tolessee

Statutory and Regulatory Frame Work This policy must comply with all relevant legislative requirements including:Company ordinance Also, this policy will comply with the relevant currently recognized accounting

standards include:

IAS 16: Property plant and equipment

IAS 17: leasing

And some applicable part of IAS 38This policy does not over rule the requirement to comply with other policies like Management andBudget policies.

Responsibility• Administration officer and Branch Manager of the SAFWCO-CED, shall be the principal

custodian of all the SAFWCO-CED fixed assets, and shall be responsible for ensuring that the

fixed asset management policy is scrupulously applied and adhered to.• The Finance Manager shall be the fixed asset registrar of the SAFWCO-CED, and shall ensure

that a complete, accurate and up-to-date computerized fixed asset register is maintained. Noamendments, deletions or additions to the fixed asset register shall be made other than by the

Finance Manager or by an official acting under the written instruction of the Finance Manager.

• Although certain responsibilities have been allocated to certain levels of management, within the

fixed asset policy, the ultimate responsibility to ensure control over each asset in terms of the

policy remains with CEO and GM.

• The Finance Department will financially substantiate the assets as per Financial Statements andparticipate in the process of physical control to achieve accurate and reliable asset information

with regards to purchases, write-offs, transfers, donations and locations.

• The system, in as far as the maintenance and management of assets for all the departments shallbe the same. The Finance Department in consultation with other departments will establish a

system for control and maintenance. Heads of Department (GM) will approve/recommend all

asset movements which relate to:1. Writing-off of items (approval by the Administration officer).2. Transfer of items (inter departmental transfers)

3. Purchasing/replacement of Assets

4. The Finance manager and where necessary his/her duly designated official shall:

Ensure implementation of the approved Asset Policy;




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Verify assets in possession of the Management every three months; Receive from the Asset Management Section a detailed “outcome report” on the

assets verification exercise;

Keep a complete and balanced record of all assets in possession of theManagement;

Report in writing all asset losses to the Management;

Ensure that the asset register of the Management is balanced quarterly.

NB: Each Branch must be provided an accurate record of all asset losses and report such losses to anytwo of the following

1. General Manager –CED

2. Manager Finance

3. Administration officerAnd it will be the duty of reported one that they initiate the procedure as guided in the policy.

Purchasing CommitteeThe purchasing committee shall be the final and authority to

purchase the any assets other than donated assets. This committee shall be consist on

1. General manager / CEO

2. Internal auditor

3. Finance Manager

4. Admin officer5. Any other person as permitted by GM/CEO

Classification of Fixed AssetsThe Manager Finance shall ensure that all fixed assets are classified under the following headings in the

fixed assets register, and General Manager shall in writing provide the Manager Finance with suchinformation or assistance as is required to compile a proper classification:

• Free hold land

• Land and building• Furniture and fixtures

• Computer and Information system

• Electrical equipment

• Motor vehicles

• Motor bikes




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Identification of Fixed AssetsThe Administration officer shall ensure that the SAFWCO-CED maintains a fixed asset identification

system which shall be operated in conjunction with its computerized fixed asset register (Tagging

system).The identification system shall be determined by the Administration officer, acting in consultation withthe Internal Auditor and shall comply with any legal prescriptions, as well as any recommendations of

the Internal Auditor as indicated in the SAFWCO-CED audit report(s).

Fixed Asset RegisterStructure of the asset register

The fixed asset register shall be maintained in the format determined by the Finance Manager, which

format shall comply with the requirements of accounting practice and any other accounting requirementswhich may be prescribed. The fixed asset register shall reflect the following information:A brief but meaningful description of each asset;

1. The date on which the asset was acquired or brought into use;2. The location of the asset;3. The title deed number, in the case of fixed property;

4.

Where applicable, the identification number (tag);5. Accumulated depreciation to date;

6. The depreciation charge for the current financial year;7. The carrying value of the asset;

8. The method and rate of depreciation;9. The source of financing; ( donor/own purchase)10. The current insurance arrangements if any

11. Whether the asset has been used to secure any debt, and if so the nature and duration of suchsecurity arrangements;

All departments and Branch Managers under whose control any fixed asset falls shall promptly providethe Finance Manager in writing with any information required to compile the fixed asset register, and

shall promptly advise the Finance Manager in writing of any material change which may occur in respectof such information.

A fixed asset shall be capitalized, that is, recorded in the fixed asset register, as soon as it is acquired. If the asset is constructed over a period of time, it shall be recorded as work-in-progress until it is available

for use, where after it shall be appropriately capitalized as a fixed asset.

A fixed asset shall remain in the fixed assets register for as long as it is in physical existence. The factthat a fixed asset has been fully depreciated shall not in itself be a reason for writing-off such an asset.




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Capitalization Criteria The capitalization amount of PR 500.00 per unit (if purchased in group/ bulk such as chairs) and PR

10000 for individual items applied as a cut off limit in this document. The fixed assets Register is to record and maintain all capital assets in excess of PR……, which consists

of assets nature wise categories, i.e. fixed and movable assets. Information regarding the value of capital

assets, acquisitions, write-offs and sources of financing is disclosed in the financial statements.

Recognition of Assets An asset is recognized when it is probable that the future economic benefits or potential service provisionwill flow to Management and the asset has a cost or value that can be reliably measured.

Exchange and Donated assetsWhere a fixed asset is donated to the SAFWCO-CED, or a fixed asset is acquired by means of anexchange of assets between the SAFWCO-CED and one or more other parties, the asset concerned shall

be recorded in the fixed asset register at its fair value. The fair value shall be the value of Asset at which

the asset can be exchange or purchase in open market in arms length transaction.

Material valueNo item with an initial cost or fair value of less than cut off limit or such other amount as the

Management of the SAFWCO-CED may from time to time determine on the recommendation of theAdministration officer – shall be recognized as a fixed asset. If the item has a cost or fair value lower

than this capitalization benchmark, it shall be treated as an ordinary operating expense.

Every Branch manager and department manager shall, however, ensure that any item with a value in

excess of set criteria, and with an estimated useful life of more than one year, shall be recorded on aninventory list. And they shall ensure that the existence of items recorded on such asset inventory lists isverified from time to time, and at least quarterly, and any amendments which are made to such inventory

lists pursuant to such stock verifications shall be retained for audit purposes.

Intangible itemsNo intangible item shall be recognized as a fixed asset, except that the Finance Manager, acting in strict

compliance with the criteria set out in IAS 38 (dealing with research and development expenses) mayrecommend to the Management that specific development costs be recognized as fixed assets.




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Reinstatement, maintenance and other expensesOnly expenses incurred in the enhancement of a fixed asset (in the form of improved or increasedservices or benefits flowing from the use of such asset) or in the material extension of the usefuloperating life of a fixed asset shall be capitalized.

Expenses incurred in the maintenance or reinstatement of a fixed asset shall be considered as operating

expenses incurred in ensuring that the useful operating life of the asset concerned is attained, and shall

not be capitalized, irrespective of the quantum of the expenses concerned. Expenses which arereasonably ancillary to the bringing into operation of a fixed asset may be capitalized as part of such

fixed asset. Such expenses may include but need not be limited to import duties, forward cover costs,transportation costs, and installation, assembly and communication costs.

Maintenance PlansAdministration officer by consenting with shall ensure that a maintenance plan in respect of every new

infrastructure asset with a value of PR 10,000 (Ten Thousand) or more is promptly prepared andsubmitted to the Management of the SAFWCO-CED for approval. If so directed by the Administrationofficer, the maintenance plan shall be submitted to the Management prior to any approval being granted

for the acquisition or construction of the infrastructure asset concerned.

The head of department controlling or using the infrastructure asset in question, shall quarterly report tothe Management of the extent to which the relevant maintenance plan has been complied with, and of thelikely effect which any non-compliance may have on the useful operating life of the asset concerned.

General maintenance of fixed assetsEvery head of department shall be directly responsible for ensuring that all assets (other thaninfrastructure assets) are properly maintained and in a manner which will ensure that such assets attaintheir useful operating lives.

Financial Management

Pre-Acquisition PlanningBefore a capital project is included in the budget for approval, the Finance Manager must demonstrate

that they have considered:The projected cost over all the financial years until the project is operational;

The future operational costs and revenue on the project, including tax and tariff implications;

The financial sustainability of the project over its life including revenue generation and subsidizationrequirements;The physical and financial out lays of that asset through all stages in its life including acquisition,

installation, maintenance, operations, disposal and rehabilitation;The inclusion of this capital project in the integrated development plan and future budgets and;Alternatives to this capital purchase.




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The Head of department and Branch Manager are accountable to ensure the Finance Officer receives allreasonable assistance, guidance and explanation to enable them to achieve their planning requirements.

Approval to Acquire Property Plant and EquipmentMoney can only be spent on a capital project if:The money has been appropriated in the capital budget,The project, including the total cost, has been approved by the Management,

The CFO confirms that funding is available for that specific project, andAny contract that will impose financial obligations beyond two years after the budget year is

appropriately disclosed.

Funding of capital projectsWithin the SAFWCO-CED ongoing financial, legislative or administrative capacity, the Finance

Manager will establish and maintain the funding strategies that optimize the SAFWCO-CED ability to

achieve its strategic objectives. The acquisition of assets will not be funded over a period longer than theuseful life of that asset.

Type of funding may comprise of the following:

1.

BORROWING Long term Short term

2. GRANTS AND SUBSIDIES

National Government

Provincial Government

Other stakeholders (PPAF etc)

3. REVENUE

Revenue arising from the following transactions and events:

The sale of goods.

The rendering of services. Exercising of legal powers and duties.

The use by others of organization assets thereby yielding interest, royalties and dividends.




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Financial DisclosureThe financial statements will disclose, in respect of each class of property, plant and equipment classified

under the categories of infrastructure, community, heritage, investment properties and other assets:

(a) The measurement bases used for determining the gross carrying amount. When more than one basishas been used, the gross carrying amount for that basis in each category should be disclosed.

(b) The depreciation methods used.(c) The useful lives of the depreciation rates used.(d) Depreciation charged in arriving at net surplus or deficit for the period.

(e) The gross carrying amount and the accumulated depreciation at the beginning and the end of theperiod.(f) A reconciliation of the carrying amount at the beginning and end of the period showing:

I. Additions

II. Disposal

III. Increases or the decreases resulting from revaluations

IV. Deductions in carrying amountV. Amounts written back

VI. Depreciation

VII. Other movements

The financial statement will also disclose:(a) Whether or not, in determining the recoverable amount of items of property, plant and equipment,

expected future cash flows have been discounted to their present values.(b) The existence and amounts of restrictions on title and property, plant and equipment pledged assecurity for liabilities.

(c) The accounting policy for restoration costs relating to items of property, plant and equipment.(d) The amount of expenditures on account of property, plant and equipment in the course of

construction, and(e) The amount of commitments for the acquisition of property, plant and equipment.




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Accounting for Fixed AssetsControl accountsEach operation must maintain separate control accounts in the general ledger for depreciation of each

major fixed asset category.

AdditionsAll costs incurred in the acquisition of new fixed assets debited to “cost of that assets”.

Installation costs are to be capitalized and depreciated over the remaining estimated useful life of theasset

All transfers of fixed assets, whether inside a cluster or to another clusterThe transferee must maintain in its books the original cost and the accumulated transferor.

The above rules must be strictly adhered to so that:

• Depreciation will be continuing to be calculated on the correct rate.

• Relocation and rationalization expenses are to be written off in the year incurred.

Purchase of fixed assetsThe cost of the asset purchase should be debited to the respective asset accounts after it has beenauthorized for purchase in accordance with the Delegation of Powers.

DepreciationDepreciation must be calculated on an annual basis. After each depreciation run, a fixed asset report must

be printed stating the following:

• Asset number

• Description

• Cost price

• Depreciation for the period

• Accumulated depreciation

• Book value

The following entries must be processed:

Entry Amount

Debit: the relevant depreciation amounts in the operating accountsCredit: the relevant accumulated depreciation accounts.




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Sale and Scrap of Fixed AssetsWhenever a fixed asset item is sold or scrapped, depreciation will be calculated automatically by theasset system during the month end run. A report stating the following will be generated for historypurposes:

• Asset number

• Description

• Cost price

• Depreciation for the year (ended the date of sale/scrap)

• Accumulated depreciation

• Book value

• Date of sale

• Selling price

The following entries need to be processed in the general ledger whenever an asset is scrapped:

Entry Amount

Credit: fixed asset account cost price of the asset written off Debit: accumulated depreciation amount of accumulates depreciation Account for assetsDebit: fixed asset written off / (profit and loss account) account with the difference between the

cost price and the up to date accumulated depreciation.

If the asset was sold

The profit/loss on the transaction needs to be calculated.The following entries need to be made in the general ledger.

Entry Amount Debit: bank or debtor the amount the asset was sold forCredit: fixed asset account the amount the asset was sold for

Debit: accumulated depreciated account the up-to –date accumulated depreciationCredit: fixed asset account the up –to- date accumulated depreciation for the Asset.

Debit: fixed asset account the profit/loss made on the transactionCredit: Credit/ profit/loss on sale of fixed the profit/ loss made on the transactionDebit: asset account

All profits on sale of individual assets must be transferred to the Asset Financing Fund.

Financial ControlsThe Fixed Asset Register must be reconciled with the following General Ledger accounts on a monthlybasis.




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1. Fixed assets accounts2. Accumulated depreciation accounts

3. Depreciation accounts

Safekeeping of Assets and Internal Control Every branch and department manager shall be directly responsible for the physical safekeeping of anyfixed asset controlled or used by the department in question. In exercising this responsibility, every headof department shall adhere to any written directives issued by the Administration officer to the

department in question, or generally to all departments, in regard to the control of or safekeeping of the

SAFWCO-CED fixed assets.

Every head of department shall ensure that the asset identification system approved for the SAFWCO-

CED is scrupulously applied in respect of all fixed assets controlled or used by the department inquestion.

The administration with the approval of G.M are required to set parameter to use any assets and alsosupposed to set initial security measures to secure the assets. The secondary duty should be of the

Department and Branch Manager and final user of assets(if any) that they individually and

collectively use the assets and take such measures that incase of unavoidable incident of loss/theft/natural disaster minimum effects of such asset be received by assets and its holders.

If in case of any guideline is provided in the any form of communication is being provided either by

assets Provider Company or by management should be base line preventive measure and must be

adhere to.

General requirements Items purchased, with an expected life span of more than one year, will be reported by the department

doing the purchasing to the Finance and Administration department to ensure recording in the assetregister.

In order to record items the Asset Control Section must be notified by the department doing the

purchasing within 14 days of any of the following possible movements:Purchases

Donations

Additions/ImprovementsDepartmentally manufactured itemsAuctions

Loss or damage

TransfersResignationsLand Sales




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The Management shall ensure that the alienation of any fixed asset takes place in compliance of company ordinance and IAS 16. The SAFWCO-CED will not transfer ownership as a result of a sale or

other transaction or otherwise permanently dispose of a non-current asset needed to provide theminimum level of basic SAFWCO-CED services.

The SAFWCO-CED will transfer ownership or otherwise dispose of a non-current asset other than onecontemplated above, but only after the management in a meeting has decided on reasonable grounds thatthe asset is not needed to provide the minimum level of basic services, and has considered the fair market

value of the asset and the economic and community value to be received in exchange for the asset.The decision that a specific non-current asset is not needed to provide the minimum level of basicservices will not be reversed by the SAFWCO-CED after that asset been sold, transferred or otherwise

disposed off.

Loss, theft, destruction, or impairment of fixed assetsEvery head of department shall ensure that any incident of loss, theft, destruction, or material impairmentof any fixed asset controlled or used by the department in question is promptly reported in writing to the

Finance Manager, to the internal auditor, and – in cases of suspected theft or malicious damage – also tothe police.

Disposal of assetsLand and Buildings shall be auctioned at the reserved prevailing market prices as indicated by the

valuators at the time of disposal;All computer equipment / motor vehicles to be disposed of will be subject to scrutiny by the IT admin

officer / Manager;

There must be a document of approval by Management or relevant head for any asset which has to bedisposed of presented to the management before the asset will be removed from the system.

Transfer of assetsThe GM and Relevant Manager shall approve all asset movements, which relate to the transfer of assets

from one department/branch to the other.When a department/branch transfers an asset or an inventory item interdepartmentally, the Asset Transfer

Form must be forwarded to the department receiving the asset or inventory item (being the Asset

Transfer Form attached). A copy of this form is to be forwarded to the Admin officer head office, one inrelevant department /branch and one to the finance Manager for the update of the asset register.

Writing off of itemsAll items to be written off must be approved by the Management after recommendation by ManagerFinance/Accounting Officer. If approved the disposal procedure will be followed in the system.

The only reasons for writing off fixed assets, other than the alienation of such fixed assets, shall be the

loss, theft, and destruction or material impairment of the fixed asset in question. In every instance where




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a not fully depreciated fixed asset is written off, the Finance Manager shall immediately debit to suchdepartment as additional depreciation expenses, the full carrying value of the asset concerned.

ResignationsAt the resignation of an employee the applicable Director or his/her duly delegated representative must

complete the relevant asset form and forward it to the Human Resources Department. This form is astatement that the inventory and asset items entrusted to the employee to execute his/her daily duties are

in good order and handed in where necessary.

Donations/acquired departmentallyWhen a donation is received or an item is acquired departmentally the item will be recorded in the assetregister at a value (fair value) prescribed by the Finance Manager. The responsible department must

complete the asset form and submit this to the Admin department.

Additions/improvementsDepending upon the type of addition or improvement to a specific asset the responsible administrationdepartment/ branch must notify the change in status. The asset will be recorded at its increased value on

receipt of the required asset form from the responsible directorate/department.When any changes to vacant land or land and buildings are affected such as subdivision, transfer to

another department, extent or holders title the current owner must complete the relevant forms andforward it to the admin and Finance department.

Replacement normsThe Administration officer, in consultation with the Finance Manager and head of departments, shallformulate norms and standards for the replacement of all normal operational fixed assets. Such normsand standards shall be incorporated in a formal policy, which shall be submitted to the Management of

the SAFWCO-CED for approval. This policy shall cover the replacement of motor vehicles, furniture

and fittings, computer equipment, and any other appropriate operational items. Such policy shall alsoprovide for the replacement of fixed assets which are required for service delivery but which havebecome uneconomical to maintain.

Stock takeStock taking will be responsibility of Administration department and ensure that all new assets are bar-coded and created on the system. Every employee will be notified within 10 days in advance of the stock

taking process and time. Stock taking will ensure that all the new assets are bar-coded and created on

system timely and accurately. It will be the responsibility of the administration department to organize




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and coordinate the stock taking process. Stock taking will take place every 12 months. After the physicalstock taking the following reports will be generated for the Finance Manager:

“Assets not yet verified”:Assets which are created on the asset system, but not found during stock take

“Assets missing from RECORD”:Assets which are scanned during stock take, but not created on the asset system.

“Assets where locations differ”:Assets found in a different office than in which it was registered on the asset system.

Inventory listsDuplicate inventory lists will be produced and handed to every employee assigned to an office. Theinventory lists will be verified by that specific employee and signed. One inventory list will be handed to

the Admin Depart and the other one will be attached to the back of the employees’ office door. If there

are any inaccuracies on the list it will immediately be rectified.

Purchase of a new asset (acquisition of asset)All new assets will receive a bar code number and description before using in SAFWCO-CED. Alldocumentation regarding the purchase of the asset must be received by the administration.Cheque number,

Copy of order,Invoice and other detail. Such as model number,

A copy of the documentation received will then be filed suitably.

Valuation of Assets

Land and buildingsAll land and buildings recorded in the SAFWCO-CED fixed asset register shall be revalued with the

adoption by the SAFWCO-CED of each new valuation roll (or, if the land

and buildings concerned fall within the boundary of another SAFWCO-CED, with the adoption by suchSAFWCO-CED of each new valuation roll).

The Finance Manager shall adjust the carrying value of the land and buildings concerned to reflect ineach instance the value of the fixed asset as recorded in the valuation roll, provided the Finance Manager

is satisfied that such value reflects the fair value of the fixed asset concerned. The Finance Manager shall

Also where applicable, create a revaluation reserve for each such fixed asset equal to the differencebetween the value as recorded in the valuation roll and the carrying value of the fixed asset before the

adjustment in question. The fixed asset concerned shall, in the case of buildings, thereafter be




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depreciated on the basis of its revalued amount, over its remaining useful operating life, and suchincreased depreciation expenses shall be budgeted for and debited against the appropriate line item in the

department or vote controlling or using the fixed asset in question.

If the amount recorded on the valuation roll is less than the carrying value of the fixed asset recorded inthe fixed asset register, the Finance Manager shall adjust the carrying value of such asset by increasing

the accumulated depreciation of the fixed asset in question by an amount sufficient to adjust the carrying

value to the value as recorded in the valuation roll. Such additional depreciation expenses shall form acharge, in the first instance, against the balance in any revaluation reserve previously created for suchasset, and to the extent that such balance is insufficient to bear the charge concerned. Revalued land and

buildings shall be carried in the fixed asset register, and recorded in the annual financial statements, at

their revalued amount, less accumulated depreciation (in the case of buildings).

The appropriate manner should also be use for donated assets.

Insurance of AssetsThe Finance Department shall ensure that all the assets are accurately insured. The Administration

officer shall recommend to the Management of the SAFWCO-CED, after consulting with the FinanceManager, the basis of the insurance to be applied to each type of fixed asset: either the carrying value orthe replacement value of the fixed assets concerned.

Such recommendation shall take due cognizance of the budgetary resources of the SAFWCO-CED. TheFinance Manager shall annually submit a report to the Management of the SAFWCO-CED on anyreinsurance cover which it is deemed necessary to procure for the SAFWCO-CED self-insurance reserve.

Depreciation of Fixed AssetsAll fixed assets, except land, shall be depreciated – or amortized in the case of intangible assets.Depreciation may be defined as the monetary quantification of the extent to which a fixed asset is used or

consumed in the provision of economic benefits or the delivery of services. Depreciation shall generally

take the form of an expense both calculated and debited on a monthly basis against the appropriate lineitem in the department or vote in which the asset is used or consumed. However, depreciation shall

initially be calculated from the day following the day in which a fixed asset is acquired.

Rate of depreciationThe Finance Manager shall assign a useful operating life to each depreciable asset recorded on theSAFWCO-CED fixed asset register. In determining such a useful life the Finance Manager shall adhere

to the useful lives set out in the annexure to this document.

In the case of a fixed asset which is not listed in this annexure, the Finance Manager shall determine auseful operating life, if necessary in consultation with the head of department who shall control or usethe fixed asset in question, and shall be guided in determining such useful life by the likely pattern in

which the asset’s economic benefits or service potential will be consumed.




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Method of depreciationThe Finance Manager shall depreciate all depreciable assets on the straight-line method of depreciationover the assigned useful operating life of the asset in question.

Carrying Values of Fixed AssetsAll fixed assets shall be carried in the fixed asset register, and appropriately recorded in the annualfinancial statements, at their original cost or fair value less any accumulated depreciation. The onlyexceptions to this rule shall be revalued assets and heritage assets in respect of which no value is

recorded in the fixed asset register.

Supplemental Topic Investment Property (If in the case any asset held in this head)Investment assets (resources held for capital or operational gain)

Investment assets shall not be classified as property, plant and equipment for purposes of preparing the

SAFWCO-CED statement of financial position. Investment assets shall comprise land or buildings (orparts of buildings) or both held by the SAFWCO-CED, as owner or as lessee under a finance lease, toearn rental revenues or for capital appreciation or both. Investment assets shall be recorded in the fixed

assets register in the same manner as other fixed assets, but a separate section of the fixed assets registershall be maintained for this purpose. Investment assets shall not be depreciated, but shall be valuedannually to determine their fair (market) value. Investment assets shall be recorded in the balance sheet atsuch fair value. Adjustments to the previous year’s recorded fair value shall be accounted for as either

gains (revenues) or losses (expenses) in the accounting records of the department or service controlling

the assets concerned.

An expert valuer shall be engaged by the SAFWCO-CED to undertake such valuations. If theManagement of the SAFWCO-CED resolves to construct or develop a property for future use as an

investment property, such property shall in every respect be accounted for as an ordinary fixed asset until

it is ready for its intended use – hereafter it shall be reclassified as an investment asset.

The Finance Manager shall adhere to the classifications indicated in the annexure on fixed asset lives,and in the case of a fixed asset not appearing in the annexure shall use the classification applicable to theasset most closely comparable to the asset in question.




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Sindh Agriculture & Forestry Workers Coordinating Organization

Acquisition Form

Voucher No #: _____________ Date : ________________

Project Name /No: ______________ Payment: ________________

Vendor Name: _____________________ Bank: ________________

Catalog # Qty Description Unit Price

ATTACHMENT ………… ____________________________

Receiver name

Compared and verified with packing slip and received ______________________Receiver’s initials

Date: _______________




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