Fixed Assets/Inventory
Fixed asset inventory and useful lives
From physical inventory to the fixed asset report.
From physical inventory to the fixed asset report.
In capital-intensive companies, property, plant and equipment is among the largest balance sheet assets. A physical inventory confirms that each asset exists and is where the register says, reconciliation aligns the register with the books, and the useful life review aligns depreciation with actual use.
CPC 27 and IAS 16 require useful lives and residual values to be reviewed at least at each financial year-end, and significant components with different lives to be depreciated separately. Changes in estimates are applied prospectively, to depreciation in the period of the change and in later periods, without restating prior ones (IAS 8).
Physical existence and the register also support impairment testing, insurance, collateral and, in concessions, the asset base recognised by the regulator.
IAS 16 · CPC 27 · IAS 8 · IAS 36
The field survey identifies and tags each asset, records condition and location, and matches the result against the fixed asset register and the general ledger. Missing assets, unrecorded assets and improper groupings are resolved with the accounting team before closing.
Reconciliation produces a clean register that supports depreciation, insurance and subsequent audits.
Remaining economic useful life is estimated by asset class, based on condition, maintenance, obsolescence and plans for use. When the purpose requires it, the same engagement determines the market value or depreciated replacement cost of machinery and equipment, under NBR 14653-5 and IVS 300.
Tax depreciation follows the rates set by the Federal Revenue Service, and the difference from accounting depreciation is adjusted in the taxable income calculation.
NBR 14653-5 · IVS 300 · RFB Normative Instruction 1,700/2017
Auditor recommendations on fixed assets, acquisitions and PPAs, preparation for an IPO or sale, insurance renewals, collateral arrangements and fixed asset system changes are among the frequent reasons.
The scope defines the sites to survey, the capitalisation criteria and the level of detail of the register. CBG's fixed asset team carries out the survey, the reconciliation and the useful life review, and the report delivers the clean register, the assumptions by class and the calculation trail.
At least at each financial year-end, under CPC 27 and IAS 16. The review may confirm previous estimates, provided it is documented.
The accounting standard sets no frequency for physical inventories, but the existence of the assets must be demonstrable. Periodic surveys provide that evidence to management and the auditor.
Accounting useful life reflects the expected use of the asset, while tax rates follow Federal Revenue rules. The two may differ, and the difference is adjusted in the taxable income calculation (Lalur).
An engineer registered with CREA, under a technical responsibility record (ART). Valuing machinery and equipment under NBR 14653-5 falls within the statutory remit of engineering (Law 5,194/1966, art. 7).
It can. Barcode or RFID tags speed up subsequent inventories and allow continuous control of the assets.