December 22, 2020
Cloud Asset Management for Government
Why do government agencies need cloud asset management? Government entities are responsible for a large number of fixed assets and often work within limited budgets, but that’s not all. They also face an additional challenge: compliance with the Governmental Accounting Standards Board (GASB) and its Generally Accepted Accounting Principles (GAAP). Cloud asset management can help these entities remain within compliance.
What are the GASB and GAAP?
Established in 1984, the GASB, according to its official website, “develops and issues accounting standards through a transparent and inclusive process intended to promote financial reporting that provides useful information to taxpayers, public officials, investors, and others who use financial reports.” The GAAP, says Investopedia.com writer Will Kenton (“Government Accounting Standards Board”; April 5, 2019), “is a combination of authoritative standards … and the commonly accepted ways of recording and reporting accounting information. GAAP aims to improve the clarity, consistency, and comparability of the communication of financial information.”
GASB’s statement No. 34 required for the first time that government agencies depreciate their fixed assets. Fixed assets are items with a useful life that exceeds a single reporting period and allow government agencies to operate efficiently – for example, buildings and office space, furniture, equipment and machinery, IT assets, land, vehicles and more. Government fixed assets also may include roads, bridges, tunnels and other components of national or local infrastructure.
Fixed Asset Depreciation
Fixed assets generally deteriorate over time; for example, a piece of equipment that runs more slowly despite routine maintenance, or a vehicle that experiences wear and tear with frequent use. Subsequently, these fixed assets experience depreciation, or loss in value, which must be reported for accounting and compliance purposes. Government entities report depreciation over the useful life of each fixed asset.
Cloud Asset Management Makes a Difference
While it’s possible to track and calculate depreciation using manual methods like spreadsheets or pen and paper, cloud asset management significantly reduces or even eliminates the human errors associated with manual tracking. Automation also saves government agencies time, can help them keep their fixed assets in good shape throughout their useful lives, and allows staff to focus on other priorities.
When calculating the depreciation of fixed assets, cloud asset management factors in three primary criteria:
- The useful life of the fixed asset in question;
- The item’s salvage value, or its reduced selling price once retired from the agency’s inventory, which may be skipped altogether if the salvage value is minimal; and
- Depreciation method (three common methods are straight-line, accelerated and units of production).
- Straight-line depreciation, which is relatively straightforward and easy to calculate, is the most commonly used method. It’s calculated by dividing the cost of the fixed asset, minus its salvage value, by the useful life of the asset (in years).
- The accelerated method allows the user to recognize more depreciation earlier in the fixed asset’s useful life and less in the later years of its life, and defer tax liability until a later time. In other words, the asset loses value at a faster rate than it would with the straight-line method.
- Units of production depreciation calculates depreciation based on the number of units it produces versus the number of years of useful life the fixed asset has left.
Asset Panda’s cloud asset management platform gives government entities the peace of mind that comes from knowing their fixed asset depreciation calculations are accurate and in compliance with GASB standards. Our mobile app syncs with the cloud, so data is always available anywhere in real time. Government offices can use the platform to store not just depreciation, but the entire lifecycle of their fixed assets, so they save time and eliminate guesswork and frustration from their asset tracking procedures. Our cloud asset management platform is completely customizable, intuitive, easy to use and cost-effective.