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Home / Magazine Articles / The impact of component accounting

The impact of component accounting

From: Karen Conneely, Group commercial manager, Real Asset Management

Sir – With the passing of the SORP deadline earlier this year, housing providers up and down the country faced the daunting task of implementing a component accounting model that would adhere to the guidelines. With most providers’ asset registers increasing tenfold, it is surprising to note that 74 per cent of organisations have not yet opted to implement a specialist solution.

While there is no simple ‘all-in-one’ solution, many housing providers addressed the changes with either a spreadsheet system, which won’t provide a stable platform for ongoing compliance, or an incumbent housing asset management system. Component accounting requires a level of detail that is less granular than a housing asset management system can typically provide and yet too detailed for a general finance ledger. How an organisation manages its assets has multiple effects on its finances and its ability to adhere to government legislation. By moving away from a cumbersome spreadsheet system and towards an accurate and robust asset register that shows the location, value and condition of assets, businesses can ensure that they achieve compliance with SORP regulations.

There is no doubting the temptation to use spreadsheets and although they are adequate for collecting basic data, there are several good reasons for switching to a specialist component accounting system designed to cope with these intricacies. Too many spreadsheets contain errors, which is to be expected with information entered by hand. Whether it is the background asset data or the formula itself, there’s little doubt that depreciation calculations, when based on a spreadsheet, are likely to be inaccurate – potentially affecting the balance sheet. By using a component accounting system, there are also major time savings from processing batch asset events such as asset acquisitions, disposals and replacements, to keep the asset register in line with the typical asset management maintenance plans.

See More On:

  • Vendor: Real Asset Management
  • Publication Date: 030 - November 2012
  • Type: Letters

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