Although asset accounting is automated in most companies, the area is often characterized by massive complexity. Increasing asset intensity, necessary adjustments to changing accounting regulations and prescribed impairment tests quickly cause the degree of complexity of some asset accounting to skyrocket to almost unmanageable heights. In this article, you can read how a strategically designed outsourcing of asset accounting can make the corporate structure lean and transparent again and how sustainable synergy effects can be achieved.
What is asset accounting?
As part of financial accounting, asset accounting records the fixed assets (valuable items and parts of assets) of a company. This is made up of tangible assets (vehicles, buildings, business equipment, machinery, etc.) as well as intangible assets (software, trademark rights, patents, etc.). Asset accounting involves a large number of complex and time-sensitive processes that must be coordinated with various people, accounting systems and sometimes different accounting standards. Nevertheless, little attention is usually paid to it, because most business transactions on fixed asset accounts – such as depreciation – are processed automatically.
What causes the complexity of asset accounting?
Asset accounting is a constant challenge for companies due to its complexity. The ongoing change in the company’s internal fixed assets – mainly due to new acquisitions and impairments – as well as ongoing changes in accounting law require not only regular further training of employees, but also fundamental considerations as to which measures – for example by implementing outsourcing of asset accounting – can be used to counter this complexity.
Complexity drivers are
- Plant Intensity
- Purchases and sales of companies or sub-sectors (carve-outs)
- Purchase Price Allocations
- Valuation according to commercial law, tax law and IFRS (plus impairment tests)
- Settlement of special items for investment allowances, investment grants, investment participations
- Billing of plant insurance
Massive complexity sparks are frequent buy and sell transactions, so-called carve-outs. This is because fixed assets have to be redistributed to the corresponding areas or assigned to them again and again. In the case of land, a separation or consolidation of land and other sub-areas is often necessary, which makes a new survey necessary. In parallel, revaluations often have to be carried out, with complexity increasing with the number of accounting standards to be taken into account. Other drivers of complexity are purchase price allocations and impairment tests in accordance with IFRS accounting rules. Purchase price allocations serve to distribute the purchase price among the individual material assets and liabilities acquired when an acquired company is included in the consolidated financial statements of the parent company. The impairment test also joins the series of complexity turbos. This is because the accounting standards of IFRS require an exact periodic assessment of a possible sustainable impairment of fixed assets, which causes a corresponding expense.
If the day-to-day business is overloaded with such activities and different accounting standards have to be observed, the degree of complexity of asset accounting quickly increases.
Asset accounting at an external service provider
Outsourcing in accounting means an increase in flexibility in terms of resources and costs. Numerous risks of daily practice that can disrupt a consistently smooth business process are cushioned. These include employee absences (even temporarily) or staff shortages in the event of strong company growth. Since new hires are often not enforceable, an external service provider can close the gap not only quickly, but also competently. Today, accounting is faced with higher demands overall. Many projects that are basically not in accounting nevertheless tie up enormous capacities in this area, so that day-to-day business suffers as a result.
Outsourcing partnerships open up new freedom to meet the increasing complexity and variety of tasks. Specialising in the process of asset accounting, for example, the services are provided at all times in accordance with the current regulations. The BPO partner takes care of the ongoing further training.
How have the requirements for accounting changed in your opinion? We look forward to your comments.
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