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Fixed assets represent a special category of assets. These assets must be assessed when they become part of a company’s assets. Compta-Facile provides an answer to the question: how to assess a fixed asset ? The assessment methods are presented according to the method of acquisition of the asset: purchased fixed asset or produced fixed asset.
assessment-fixed-asset
How to evaluate a purchased fixed asset?
This involves assessing a fixed asset that has been acquired for consideration by a company. In this case, it must be estimated at its acquisition cost .
Assessment of the purchase price of a fixed asset
The purchase price takes into account, as its name suggests, the amounts paid to acquire the property in question. To these amounts must also be added the amount of non-recoverable taxes. In addition, all discounts, rebates and rebates obtained as well as early payment discounts and recoverable deductible VAT must be deducted.
Assessment of incidental costs of purchasing a fixed asset
Incidental costs are directly attributable internal or external costs incurred to put the asset in place and in working order for its intended use . Examples of incidental costs to be included in the acquisition cost of an asset, if incurred during the period of acquisition of the asset , include :
Customs duties
Delivery, transport and transport insurance costs,
Installation and assembly costs to enable the repair (labor to install the immobilizer, adjustment costs),
Costs of carrying out operational tests,
Fees (agency, notary, etc.), commissions, deed costs and registration fees known as fixed asset acquisition costs.
The acquisition costs of fixed assets may, at the company’s option, be left as expenses or added to the acquisition cost of the fixed asset.
On the other hand, the following are excluded from the acquisition cost of a fixed asset :
Preliminary study costs,
Expenses for training employees in the use and maintenance of the fixed asset,
Current maintenance and upkeep expenses,
Expenses indirectly related to the acquisition (general and administrative costs).
Note: incidental costs incurred after the acquisition period are recorded as expenses unless they meet the conditions set for capitalizing them.
Assessment of financial costs of purchasing a fixed asset
Financial expenses are understood here in the sense of ” borrowing costs “. These are financial interests remunerating capital lent to the company to acquire a fixed asset. These expenses are similar to charges but they can, in practice, be incorporated as an option into the acquisition cost of the fixed asset concerned.
The immobilization must require a long period of preparation or construction before it can be used,
The costs are directly attributable to the acquisition and are incurred during the period of acquisition of the property,
The financial charges are effective, that is to say they have actually been incurred (accrued interest not yet due is therefore excluded).
Please note that if a company applies this solution, it must apply the same accounting treatment for all other fixed assets and also for stocks.
Assessment of the costs of dismantling an asset
This concerns the costs of dismantling, removal and restoration. Specific and complex rules apply in this case. It is advisable to use specialist documentation and/or benefit from the support of an accountant to assess them.
Special cases of purchased fixed assets
In certain cases, different or additional specific rules may be imposed by the texts. This is particularly the case for the assessment of real estate complexes , research and development costs , software or Internet sites , for example.
How to evaluate a produced fixed asset?
A fixed asset that is produced by a company for its needs must be valued at its production cost .
Production cost = acquisition cost of materials used + direct production costs + indirect costs + dismantling costs + financial costs
Assessment of the acquisition cost of materials consumed
The acquisition cost of materials consumed is the same as that incurred for purchased fixed assets. The only difference is that it concerns the materials consumed and not the fixed asset itself since it is being manufactured. In general, the following formula is applied:
Cost of acquisition of materials consumed = purchase price of raw materials used + directly attributable costs (incidental costs)
Assessment of direct production costs
Again, direct costs are expenses incurred during the production phase only and are:
Determinable without intermediate calculation,
Necessary for the installation of the property and its operation,
Directly attributable to production or installation and in working order.
Assessment of indirect costs
Indirect costs may be included in the production cost of a fixed asset if they are reasonably related to the production of the asset in question. In this case, it is necessary to base the calculation on correctly defined allocation keys or on any other appropriate element (e.g. timesheet). The following may be concerned in particular: