Acquire-to-Retire

Discussion Document

Drivers

Changes are prompting financial executives to take another look

at their assets based on a variety of reasons:

M&A activities

Revaluations

Validation of existence and

Integration of systems

Nexus

Cost cutting measures

Tax impacts of asset values, depreciation and locations

Potential insurance savings

Automation of data collection

Inefficiencies

Manual activities impacting days to close

Disparate systems creating problems in accuracy and availability of data

Lack of asset tracking tool, processes and procedures requiring attention

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Drivers, continued

Inaccuracies in reporting

Unreported asset transactions

Ghost assets requiring identification

Business unit, regional and departmental requirements

Product costing inaccuracies

Tax & MD&A’s

Inaccuracy in CIP balances

Processes and requirements issues

Capital expenditure processes

Policies & procedures require updating

Authorization limits and thresholds require updating

Project tracking needs to be addressed

Accounting treatment requiring clear definitions

2

Drivers, continued

Systems do not support needs

Project management system integrations

Fixed asset systems require updating/integration

Data collection tools require updating

Controllers lose sight of what assets they actually have

Physical inventories required (cycle counting)

Asset tagging/identification process & procedures required

Accuracy and/or reliability of data needs improvement

Market values require updating

3

Acquire-to-Retire Life Cycle

The Acquire-to-Retire life cycle encompasses activities from

pre-acquisition through retirement

Pre-acquisition processes

Acquisition processes

Monitoring & tracking

Financial and statistical reporting

Processes require significant data collection and manual

intervention

Multiple sources of information

Non-automated activities

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Processes & Activities

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Pre-acquisition

Monitoring

&

Tracking

Reporting Acquisition

Capital expenditure

requests

Justification

requirements

Project approvals

Project tracking

Capitalization

governance

Purchasing

requisitions

Purchase orders

Receiving

Disbursements

Approval

processes

Capital &

expense

distribution

Asset

identification

Data collection

Data entry

Asset transfers

Disposals

Status changes

Other significant

activities

Depreciation and

amortization

BU, Country,

regional balance

sheet & P&L

Product costing

MD&A

Tax

Analytics

Market values

Pre-acquisition Processes

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Pre-acquisition

Processes and systems utilized in the pre-acquisition include budget/planning, Project Management

processes and the Purchasing processes.

• Pre-acquisition

phases include the process of Capital Expenditure

requests and approvals which

‒ Utilize project tracking methodologies

‒ Utilizes CapEx policies & procedures

‒ Follows Capital & spending authority limits

‒ And follows Capitalization/depreciation rules

CaPex Request

Approval/ authorization

Polices

Project Management

module

Budgeting/ ah-hoc

requirements Purchasing

Purchase order

requisitioning

Systems/applications

Governance/Polices & Procedures

Activities

The CapEx process normally defines - Authorization levels and information required

for the approval process; Capitalization policies and procedures; Initial departmental/business unit ownership

Review & approvals

Common Issues

Lack of CapEx policies & procedures

Outdated authorization matrices

Lack of adherence

Lack of project tracking tools

Accounting treatments not clearly defined

Lack of accountability

Acquisition Processes

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The acquisition process in normally when the fixed asset subsystem gets populated. Typically though, records

are summarized into the general ledger and manually researched to be entered into the fixed asset modules.

• Purchase order processes Data from this process

can be used to pre-populate assets subsystems and

project management.

‒ Requisition data

‒ Vendor and asset information

‒ Asset information

• Purchasing including the approval of purchase orders

‒ Can be used for project tracking

‒ Can be used to compare against authorized

project expenditures (automated controls)

‒ Used to track commitments (open PO’s)

• Receiving process is typically the process in which the

data is captured into Accounts Payable

‒ Data from A/P transactions are used to populate

the fixed assets module (quite often manually)

‒ Receiving documents should contain vital

information such as serial #’s, model #’s and

very distinct descriptors and can be automated

to populate required fields.

Systems/applications

Governance/Polices & Procedures

Activities

Acquisition

Approval/ authorization

Polices

Project Management

module Purchasing

Purchase order processing

Accounts Payable

Receiving

Validation and data collection

General Ledger

Fixed Assets

Common Issues

• Non-standardized requisition processes

• Lack of integration with A/P and project tracking

• Incorrect accounts being utilized

• Asset data not being captured

• Detailed asset information not available

Monitoring & Tracking Processes

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Data collection and monitoring are the most data intense portion of Acquire-to-Retire. These processes require

specific data about individual assets or asset groups as well the activities that take place.

• Data Collection phases normally require the most

manual activity. This is due to the fact that much

information is not available.

‒ A/P records

‒ Divisional/department asset activities

‒ Disposals

‒ Transfers

‒ Maintenance (if tracked)

• A/P close process will generate additional fixed asset

activities which will need to be included in the fixed

asset module.

• Divisional/department submissions include asset

activity that has occurred but need to be taken into

consideration throughout the month. These should be

standardized reporting methodologies.

Systems/applications

Governance/Polices & Procedures

Activities

Asset Capitalization

Policies

BU, Regional reporting

Data collection

Accounts Payable

Validation and adjustments

General Ledger

Fixed Assets

Common Issues

• Multiple disparate systems

• Summarized A/P activity requiring research

• Lack of asset movement reporting

• Lack of physical inventory policies & procedures

• Business units not adhering to corporate requirements (Silo’s)

• Lack of reporting capabilities

Monitoring

&

Tracking

Reporting Processes

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The monthly close and reporting process is normally automated within the fixed asset system. Validation

processes as well as data flow processes should be in place to capture any activities.

Reporting includes the generation of reports for

internal and external customers. Reporting

requirements include:

‒ Data use for Tax reporting

‒ Data used for MD&A’s

‒ Data used by Divisions for inventory

tracking

‒ Data used for product costing

‒ Data used for tracking

Common Issues

• Non-integrated systems

• Asset reporting inadequate for needs

• Validation of calculations not being performed

• Results not shared with Tax or BU’s

• Reconciliation and roll forwards not being performed timely

Reporting

The monthly close process requires the updating of the Fixed Assets module for activities such as CIP completion; Disposals; Transfers; Additions; Reclassifications ; Reconciliations; Roll forwards

A/P month-end close

Data transfer

Monthly Close Schedule/Task

Lists

Systems/applications

Governance/Polices & Procedures

Activities

Regulatory reporting

requirements

CIP review and

reclassification

Asset Disposals,

transfers etc.

Tax Fixed

Assets

Asset change polices & procedures (transfers,

disposals, etc.)

Depreciation/

amortization

Statutory reporting

requirements

General Ledger

Asset Reporting

Contact Information

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Kevin J. Duffy

duffyri@yahoo.com

www.linkedin.com/in/duffyri