Do You Know Where Your Computers Are? There Are Big Pluses for an Organization That Institutes a Technology Asset Tracking System to Keep an Eye on Network Hardware, Servers, Desktops, Notebook Computers, and Software

By Mouritsen, Matthew L.; Mano, Ron | Strategic Finance, January 2007 | Go to article overview

Do You Know Where Your Computers Are? There Are Big Pluses for an Organization That Institutes a Technology Asset Tracking System to Keep an Eye on Network Hardware, Servers, Desktops, Notebook Computers, and Software


Mouritsen, Matthew L., Mano, Ron, Strategic Finance


With advanced computer systems and software programs now present in the marketplace, there are virtually no limits to the number of fixed assets an organization's accounting department can track. While they devote much attention to tracking salable inventory, numerous companies drop the ball when it comes to overseeing technology assets. Are companies tracking these assets? Many aren't.

Does it matter? As companies have moved into distributed computing environments, technology assets such as network hardware, servers, desktop computers, notebook computers, and the software that resides on them have become common. Tracking and managing these assets helps ensure that their intended returns are realized--to say nothing of the losses that can occur when they aren't tracked, such as redundant purchases of technology products, theft, and property taxes paid on idle hardware.

In the past, when technology was absent, companies used cumbersome accounting practices. The tedious, manual fixed-asset systems of bygone days limited how many fixed assets a company's available staff could reasonably track.

To maintain a manageable number of fixed assets on the accounting records, companies used to set dollar limits on assets that would be depreciated by applying the materiality concept--namely, that accounting should separately recognize only those events that are relatively important for understanding a company's financial statements. If an asset's acquisition cost was below a predetermined level, it would be expensed in the current period. Despite today's high-tech economy and the potentially limitless assets that can be tracked, many organizations still use these methods.

[ILLUSTRATION OMITTED]

Why don't they track technology assets? These days, using a technology asset tracking system is possible and offers real advantages. Computers, whether they are laptops, desktops, servers, or network devices, provide economic value. They contribute to the processes that deliver an organization's products.

To their detriment, many organizations don't even know what hardware and software items they own. Nor are they aware of where these assets are or what personnel are using (or perhaps not using) them. Moreover, most total cost of ownership (TCO) estimates for technology assets, like the personal computer, describe the cost of acquiring the hardware and software as only about 20% of the total cost of owning them.

The more significant costs of owning technology assets derive from activities related to maintenance, downtime and downtime prevention (virus protection), security, Help Desk support, training, network infrastructure, and disposal. Therefore, it's important for an organization's accounting function to track technology assets to gain an understanding of how the remaining 80% of the TCO of these assets is being incurred.

REALIZE THE BENEFITS OF ASSET TRACKING

The value of technology assets becomes doubtful when they sit in storage; await installation, repair, or delivery to the end user; or are inaccessible due to security lockdowns or damage by viruses. This downtime results in lost productivity and increases the cost of owning the asset; therefore, the asset must be tracked and managed.

Management accountants should also bear in mind that, to be an asset, technology assets must be the result of a past transaction. They may have been:

* Purchased and depreciated over time,

* Purchased and expensed at the time of purchase,

* Leased, or

* Inherited or donated.

Accounting departments keep records of technology assets that were purchased and depreciated over time until the assets are sold or retired. Whether leased or expensed, however, these assets rarely make an appearance on the balance sheet. We found one company that expenses technology assets with purchase prices of less than $5,000, while smaller companies set the limit at $1,000 or less. …

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