Policy and Procedure - Accounting for Assets

This policy establishes the fundamental guidelines and practices for properly accounting and reporting assets on the Company’s Balance Sheet. An asset is an element of the financial statements constituting economic resources as of a certain date, and expected to benefit future operations i.e. land, buildings, work-in-process, inventory, and receivables.

Assets are recorded on the Company’s Balance Sheet using the accrual basis of accounting. Increases in Assets are recorded as debits.

Assets represent items of value that the Company owns or controls. Assets have three primary characteristics:

They are an economic resource expected to provide future benefits to the Business.

The event giving rise to the Company’s right to control of the asset has already occurred.

The company maintains a series of internal control checklists which help protect company assets. Persons reviewing this document should also review the internal control checklists.

The person responsible for recording fixed assets does not make general ledger entries

The reconciliation of the Fixed Asset detail accounts with the fixed asset control accounts and making entries into the fixed asset software are separate

The custodian of the fixed assets and the taking of physical inventory are separate

The person responsible for tagging fixed assets is not the fixed asset custodian

The person responsible for locating missing fixed assets is not the fixed asset custodian

The Controller or designee is designated as the Fixed Asset System Coordinator and is responsible for ensuring:

Administration and maintenance of the asset and property accountability and control system

That Property Custodians have current records of the property for which they are responsible

That the designated Property Custodians are responsible for maintaining current custodial records for all in-use fixed assets within their assigned

Developing systems which assure that assets are given proper care and protection and are used for official business purposes only

Notifying the Controller whenever fixed assets are acquired lost, destroyed, stolen or disposed of

Identifying and reporting to management any property which is useable but not needed, or which should be disposed of

Ensuring that company property is used only for the conduct of official company business

Assets are further organized on the Company’s Balance Sheet in descending order of liquidity.

Positive identification of Company fixed assets requires the use of a tagging system.

The Company will capitalize assets which have an expected useful life of more than one year and a value of $1,000.00 or more. Exceptions to this include certain office equipment.

Expenditures on assets must be capitalized (amounts added to the carrying amount of the asset) when it improves the condition of the asset beyond its originally assessed standard of performance or capacity. This can occur through an increase in the annual service potential provided by the asset or increasing the useful life of the asset.

Expenditures that do not meet the above criteria or merely restore the asset to its original function must be expensed as repairs and maintenance as incurred.

Certain assets like personal computers, digital camera’s, small tools, calculators, etc., which do not meet the capitalization threshold shall be assigned and tracked in order to prevent theft and loss.

A contra account is an account which partially or wholly offsets another account. Contra accounts are used to change the carrying amount of an asset. The contra account accumulates amounts that are typically subtracted from the original asset balance, such as depreciation. The contra accounts are also referred to as valuation accounts. Asset Contra accounts have a credit balance, which is the offset against the asset account.

Allowance for doubtful accounts (contra valuation account to Accounts Receivable)

Unrealized gain or loss on investments (contra valuation account to Long-term investments)

For financial reporting purposes, the Company may report assets net of their respective valuation or contra accounts.

All non-current assets with limited useful lives, including intangibles, shall be depreciated. Assets whose service potential does not diminish with time or use, like works of art, shall not be depreciated. Accurate depreciation methods and estimated useful life is critical in correctly determining company financial performance. Estimated useful lives shall be as accurate as possible and take into account physical wear and tear, technical obsolescence and commercial obsolescence, and conform to any government regulations.

Some assets will be made up of a number of different components with differing useful lives. The company shall depreciate these components separately over their useful lives, if not doing so would have a material impact on the total reported depreciation expense.

Historical cost is the amount actually paid for the asset, as evidenced by checks and other documents. This is ordinarily adjusted over time for amortization, such as depreciation. Historical cost is the valuation measurement generally used for plant and equipment.

Replacement Cost is the amount that would have to be paid for a current acquisition of the same or an equivalent asset today. Current cost is the valuation measurement generally used for inventories.

Fair Market Value is the net amount expected by selling the asset in a liquidation. Fair market value is the valuation measurement requirement for marketable securities.

Net Realizable Value, is the amount expected to be received for the asset, considering other reasonable further costs to make the item ready for sale, including allowances for un-collectibles. Net realizable value is the valuation measurement generally used for accounts receivable.

Present Value is the value today of some future payment, or stream of payments, discounted at the appropriate interest rate. Present value is the valuation measurement generally used for long-term notes.

The following table lists the Company asset categories, description, valuation method, and account code.

Asset Category	Description	Valuation	G/L Code
Cash	Cash deposited in accounts with less than 120 days maturity	Replacement
Marketable Securities	Stocks, Bonds and Other Liquid Assets	Replacement
Prepaid Expenses	Unused or unexpired prepaid economic benefits	Replacement
Accounts Receivable	Funds earned but not yet received from customers	Net Realizable Value
Equipment	Amount paid for capital equipment	Historical Cost
Equipment – Accumulated Depreciation	Contra account used to offset the depreciation charge. Accumulated depreciation is the reduction of the carrying amount of the assets on the balance sheet to reflect the loss of value due to wear, tear, and usage.	Allowance, created by a charge against earnings, to provide for changes in the value of a company's assets.