Lesson 1, Topic 1
In Progress

3.2 The asset register for a business unit is updated for three case studies.

ryanrori January 14, 2021

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In its simplest form an asset register is just a list of all the assets owned by an organisation. You might think that it is obvious that an organisation should have a list of all the things it owns, and it is. But in reality, it very often doesn’t work like this. If the organisation is small, then it often relies on a few people to remember all the things it owns. For example, do you have a list of all the things you own in your home?

Large organisations often have many different lists; for example, the finance department might have a list of the value of all the assets, while the maintenance department might have a list of when certain assets need to be serviced. The problem here is that these lists usually don’t agree, so you never know which one is right.

COMPOSITIONS OF AN ASSET REGISTER

There is mandatory information that constitutes an asset register. A mere compilation of information does not produce an asset register

Mandatory information includes:

  • Date, description, serial number, bar code number, asset number, location, room number, business unit, username, depreciation start date Life span, cost price, accumulated depreciation, net book value, residual amount, date of audit, status, rights and obligations.

For this list of assets to be useful, it has to contain enough information on each asset so that the asset can be effectively managed. Some of the information that should be contained in an asset register is given below:

  • Each asset must have a unique name that clearly identifies the asset throughout the entire organisation.
  • There should be a basic set of data that is the same for all the assets within the organisation, such as the location, age and assessments of value, performance, condition and risk.
  • The register should also record for each asset any information over and above the basic set of data that is necessary to effectively manage the asset. This would also include regular monitoring information such as when the asset was last serviced, or how much it has been used.
  • The asset register by itself is not particularly useful to an organisation. It must be kept up-to-date, and it must provide useful information to the organisation. How this is done is defined by the Asset Management Plan.
  • It is not feasible for an organisation to include every single thing it owns, down to the last pencil and washer on the asset register, so a line has to be drawn somewhere. Ultimately, the value of the information recorded must be greater than the cost of obtaining and maintaining it. But this is not easy to establish. Normally, in order to decide on which assets to include in a register, organisations would look at the following for each type of asset:
    • the value of the asset to the organisation,
    • the information required to effectively manage that type of asset, and
    • the cost of obtaining and maintaining that information.

Effective Asset Registers

1. Decide on an Identification and Classification System

  • Because it is so necessary for each asset to be uniquely identified the development of a comprehensive and detailed classification and identification system is the first step. The simplest form of identification system is just to give each asset a sequential number. This is easy to implement, but gives the users no information about what type of asset a particular number refers to.
    • A more intelligent form of identification classifies each asset according to one or more criteria, and then assigns a code to each classification. An individual asset’s identification number is then made up of the classification codes, and a sequential number to distinguish it from any other assets that are identically classified. An example of a classification system may be to classify assets according to their physical location, their type and their function or cost centre within the organisation.

2. Determine Boundaries for the Identification System

  • Once the classification system has been decided upon, it is necessary to determine exactly what types of assets fall into which class, and to assign a code to each class. Asset type classifications may be common across the entire water services sector, but location classifications would obviously be local to each institution. Each institution would thus have to decide on the exact boundaries of each location class, and assign unique codes to those classes.

3. Determine the Asset Types and their Measures

  • A list of all the different types of assets must be drawn up. This may have been done as part of the classification system if that system classifies assets according to their type. It could also be standardised across the sector. Part of this exercise will also be to determine which assets will be included in the register, and which ones will be left out.
  • For each type of asset it would then be necessary to determine exactly what information about that asset would need to be recorded, the units of measure and the level of accuracy necessary. It would also be necessary to draw up unambiguous and effective measures for the value, performance, condition and risk assessment of each class of asset. Assets that require exactly the same information to be recorded, and that can use the same measures of value, performance, condition and risk should be grouped into the same class of asset.

4. Determine required values for Asset Measures

  • Once measures of performance, condition and risk have been determined for each class of asset, it is necessary to determine the required values of these measures. The required levels of service set in the AMP will determine these required values. Levels of service will have to be determined for specific functions of the organisation, for example, minimum pressures and quantities to be delivered. These levels of service must then be translated into required values for the performance, condition and risk for the individual assets that are required to provide that service

5. Capture data and a measure of data accuracy for all assets

  • Once all of the above definitions have been completed, it will be necessary to capture the information on all the assets in the organisation. To start with this can be done from existing information such as drawings, insurance reports, etc. The accuracy of this information must then be verified, by means of field surveys. The accuracy can should then be continuously upgraded by checking it whenever possible, such as during maintenance. By keeping careful records of the accuracy of the data in the register it is possible to determine where verification is most needed, and to prove to the users that the data is accurate and can be used for effective decision making.
  • Depending on the size of the organisation, and the nature of the equipment, it may well be necessary to employ sophisticated tools such as surveys and GIS tools

6. Register Maintenance and Use

  • Setting up an asset register is a once off process, but the register cannot be left there. To be useful the register must be kept up-to-date and the accuracy must be continuously verified. An important part of creating the register is to determine who is responsible for maintaining what data, and setting out the policies and procedures for this maintenance.
  • At this stage it is also necessary to determine the outputs of the register, in the form of what reports are to be produced, and to determine who has access to which reports. These policies, procedures and reports will not be static, but will usually grow and develop over time

The valuation of assets in a business unit is explained with reference to depreciation and investment. 

 Assets are valued at their net replacement value.

 This is calculated as the original cost of the asset minus the accumulated depreciation.

Reasons for depreciation are explained with examples and an indication is given of the purpose of depreciation. 

Depreciation is the value of the asset written off during year to account for wear and tear of the asset during the year. Assets that are purchases for continued and long-term use in earning profit in a business. Examples: land, buildings, machinery, etc. They are written off against profits over their anticipated life by charging an annual amount calculated so as to eliminate the original cost (historical cost), less residual value, over that period.