Fixed asset management is the process of tracking non-current tangible assets. Enabling businesses to maximise the usability of each one. It focuses on the management of physical assets that are primarily used to help generate revenue. Such as property, plant, and machinery. As opposed to current assets, such as cash and short-term investments.
Fixed assets are long-term assets, referred to as capital assets. They have a life span of one accounting year or more. Appearing on a balance sheet as Property, Plant, and Equipment (PP&E). Two examples of PP&E are IT equipment and an office building. This is because of their physical form. Noting that they will be used to generate revenue in the next few years of operations. They can also be referred to as non-liquid assets. Meaning they can't easily be converted to cash. Whereas current assets, such as inventory, can be converted to cash or used within the year.
Fixed management tools let businesses track and record their assets. With the intention of improving life cycle management. This means, when an asset reaches the end of its usable life, there is enough data to generate an estimated salvage value based on if it was broken down and sold in parts. Or, in some cases, the data will highlight the asset is no longer valuable. Recommending that it should be disposed of without receiving payment.
Finance managers and accountants typically take an interest in knowing how assets are managed. To ensure correct management as per accounting standards. For instance, there are specific depreciation protocols to be followed with fixed assets. Especially when compared to leased assets, which are treated differently to owned assets. Because of this, the IFRS has defined specific standards to manage different types of assets. For example, IAS 16 relates to the management of property, plant and equipment.