The Accounting & Finance Roadmap For Distressed Companies
The Fixed Asset Roll Forward Template & Guidance To Keep Your Balance Sheet Pristine
An awful lot can happen from one moment to the next, even more so for companies and their many moving parts. While a passing glance at two consecutive balance sheets might look remarkably similar to the untrained eye, those line items have a heck of a story to tell, especially when it comes to your fixed assets.
That’s precisely where the fixed asset roll forward -- also known as the property, plant, and equipment (PPE) roll forward -- comes into play. It fills in the blanks between accounting periods and tells that story, ensuring that all of your fixed assets and the related activity occurring in that interim align with one another.
However, unlike its more popular cousins, receivables and cash in particular, the fixed asset roll forward doesn’t get nearly the attention it deserves considering its importance, at least from the non-accounting layfolk. To right that particular wrong, Embark has created our Fixed Asset Roll Forward Template for you to use within your own accounting procedures. Coupled with a discussion of the schedule as well as a few best practices for good measure, you’ll walk away with a better understanding and far greater appreciation for the fixed asset roll forward’s significance in your financial reporting.
A Closer Look
As you’ll see from our accompanying template, the concept behind the schedule is pretty straightforward. It tracks fixed asset historical costs and accumulated depreciation for the fixed assets within the balance sheet, showing the beginning balances, additions, disposals, transfers, and the ending balance. Think of it as a detailed log of all the movement from Point A to Point B, with all of the activity between those two points detailed in the schedule along with the accompanying asset depreciation.
As businesses become more complex and balance sheets expand, the fixed asset roll forward plays a vital role in ensuring you properly account for every fixed asset, resulting in a clean and accurate balance sheet. A spreadsheet like our template will serve most newer and smaller companies quite well but, as those fixed asset line items grow, a more advanced and comprehensive accounting system could save significant time and effort while eliminating entry errors.
In fact, automated reports in such systems often replace manual entries altogether. However, whether you use our template or a fixed asset module within a dedicated accounting system, having a clean and simple-to-use tool can maintain sanity for any accountant compiling Gross and Net assets during reporting. In other words, no matter how many twists and turns the reporting plot might take, there’ll always be a clear and unobscured window into the overall reporting narrative itself, a notion that is helpful for accountants and auditors alike.
A Few Best Practices
Although the fixed asset roll forward schedule is fairly self-explanatory, a lot can go wrong if you’re not meticulous and organized with your entries. Remember, the schedule tracks every fixed asset on an individual basis, not as a group, so an efficient but accurate approach will always serve you well. On that front, Embark has a few pointers to keep in mind as you proceed.
Be mindful of the useful life for each asset and depreciate accordingly on the roll forward. Granted, this isn’t exactly revelatory advice, but you might be surprised over some of the more common issues plaguing roll forwards and balance sheets. If you buy a new building, for instance, a 30-year useful life simply makes more sense than a five-year one. Be logical and organized, mind GAAP’s depreciation guidelines, and stay on the good side of the audit gods.
Use a Bucket Approach
There’s a time and place for everything in the fixed asset roll forward. Use different buckets to categorize various activities. Purchases and disposals go together about as well as oil and water, particularly concerning cash flow. Separate them into different buckets on the schedule to keep your financials in good order. In this instance, crossing streams could wreak havoc on an otherwise perfectly fine income statement. The same holds true for a lack of sufficient attention when tracking capitalized interest during construction when applicable.
Construction in Progress
Let’s say you’ve broke ground on a new facility but it’s not yet in use during a particular accounting period. Place this asset into a separate column, construction in progress, until you actually put it in use. Don’t depreciate this type of asset until it’s actually in service.
Held for Sale
Finally, there’s the often overlooked Held for Sale tracking on the fixed asset roll forward. To save you some Googling time, this details translations related to assets considered held for sale and, thus, tracked separately to facilitate potential disclosure. Remember to halt all depreciation on any assets held for sale.
A fixed asset roll forward isn’t just beneficial for you and your financials, but your auditor as well, helping them tie everything together. Therefore, consider it one of those schedules that you should look at every month. So take our Fixed Asset Roll Forward Template and pearls of wisdom to make the fixed asset roll forward a dependable schedule that never leads your financials astray. And as always, Embark is here to provide our guidance along the way, ready to help your company reach its potential.