Threat of a backlash for failing to comply with legislation that requires organisations to formalise their asset registers is seeing companies and municipalities in SA scramble to meet the 1 June deadline for the Generally Accepted Municipal Accounting Practices (GAMAP).
However, in their haste, organisations risk creating more work for themselves by not properly adhering to the specifications laid down in the legislation. Taking the wrong approach can mean unnecessary time and money spent on repetitive processes.
GAMAP, a global best-practice accounting standard based on Generally Accepted Accounting Principles (GAAP), prescribes a standard to which municipalities must adhere in disclosing financial statements. Principle 113 of the practices specifically states that municipalities must distinguish between capital expenditure on assets and the repair and maintenance of assets. The capitalisation of maintenance expenses will no longer be permitted, and the procurement of assets will be conducted using a cash-based asset register.
Similarly, the Public Finance Management Act, which calls for the efficient and effective management of revenue, expenditure, assets and liabilities, prescribes a lot more than merely the compilation of an asset register. Chapter 10 of the Act states that the requirements of asset management include financial information on asset acquisition and disposal. Financial information should include records on all maintenance work conducted on the asset. This means the Act spans the complete lifecycle of the asset, from acquisition through operation to disposal.
Since all companies and government agencies have to get their asset registers in order sooner or later, it makes sense to get the process right from the start. This means ensuring the selected solutions partner provides a comprehensive and effective solution that adheres to all legal requirements.
Proper execution of an asset register builds a complete asset history which acts as a central hub from which are managed reliable financial planning, timely preventative maintenance and maximisation of asset performance in relation to asset lifecycle.
Quality control, cost comparisons between products and crucial information for warranty claim purposes are additional advantages of an asset register.
There is no long-term benefit in postponing the formalisation of asset registers.
Adriaan Scheeres, CEO and co-founder, Pragma Holdings.
A sound solution should also cater for health, safety, security, environmental and statutory compliance requirements. Remote data logging and simultaneous condition assessments also provide invaluable information for the accurate calculation of asset depreciation.
The range of benefits enjoyed together with the legal implications of non-compliance provides a strong incentive to implement an asset management solution without delay. There is no long-term benefit in postponing the formalisation of asset registers. Organisations should be long down the road and past their teething problems when the hammer of the law finally falls.
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