Fixed Assets

Department: Finance & Accounting Process Owner: Controller Last Updated: January 2026

1. Overview and Purpose

Objective: To define procedures for identifying, recording, tracking, and depreciating fixed assets. This SOP ensures that qualifying purchases are capitalized appropriately, fixed asset balances are accurate, depreciation is recorded monthly, and asset documentation is maintained for audit and reporting needs.

2. Scope

This SOP applies to all asset purchases and capitalizable improvements, including equipment, furniture, technology, and building or site improvements. It includes:

• Reclassifying asset additions (expense → balance sheet)
• Fixed asset register maintenance
• Monthly depreciation entries
• Asset disposal or retirement adjustments

Lease assets are addressed separately in another SOP.

3. Key Policies and Prerequisites

Before implementing this process, establish and document the following policies:

• Capitalization Threshold: Organizations should establish a formal capitalization threshold based on their size and materiality considerations. Document the threshold in your accounting policies and apply it consistently.
• Useful Life Policy: Establish standard useful lives by asset category and document them in your accounting policies. Apply useful lives consistently once established.

4. Step-by-Step Process

4.1 Identify Potential Fixed Asset Purchases

• During accounts payable processing and card review, flag purchases that:
  • Are durable / multi - year use items
  • Exceed the organization's capitalization threshold
  • Relate to capital projects
  • Examples: vehicles, HVAC installations, computers purchased in bulk, furniture packages, building improvements
• Notify the Controller and Senior Accountant of candidate items during month-end preparation

Reviewer / Back-up: AP Specialist / Accounting Coordinator

4.2 Reclass Asset Additions (Expense → Balance Sheet)

• Pull monthly list of flagged purchases from:
  • Accounts payable detail reports
  • Corporate card transaction exports
  • Bank feed one-off transactions
• For each qualifying asset:
  • Confirm vendor invoice and description
  • Determine asset category (equipment, furniture, improvements, etc.)
  • Post journal entry in the accounting system to reclass:
    • Debit: Fixed Asset account (by category)
    • Credit: Original expense account
  • Add memo noting asset name and in-service date
  • Attach invoice and journal entry support to the shared Fixed Assets folder

Reviewer / Back-up: Senior Accountant

4.3 Update Fixed Asset Register

• Open the Fixed Asset Register (Excel) in the shared drive
• Add new assets with:
  • Asset name / description
  • Vendor
  • In-service date
  • Cost
  • Useful life
  • Depreciation method
  • Funding source / class (if grant or capital-campaign related)
• Tie total asset additions to general ledger fixed asset accounts

Reviewer / Back-up: Controller

4.4 Calculate and Record Monthly Depreciation

• Using the fixed asset register, calculate monthly depreciation per asset:
  • Straight-line unless otherwise specified
• Prepare depreciation journal entry in the accounting system:
  • Debit: Depreciation Expense (by category / class)
  • Credit: Accumulated Depreciation (matching asset category)
• Post journal entry by month-end close deadline
• Save depreciation support schedule in the shared month-end close folder

Reviewer / Back-up: Senior Accountant / Accounting Coordinator

4.5 Review for Disposals or Retirements

• Quarterly (or as needed), review register for:
  • Assets disposed, sold, or no longer in service
  • Fully depreciated items still active
• For disposals:
  • Remove cost and accumulated depreciation
  • Record gain / loss if proceeds exist
  • Update register to "Disposed/Retired" with date and reason

Reviewer / Back-up: Controller

5. Key Roles and Responsibilities

6. Key Files and Systems

• Accounting System – Fixed asset GL accounts and journal entries
• Fixed Asset Register (Excel) – Source of depreciation logic and inventory
• AP System / Card Transaction Exports – Source lists for identifying additions
• Shared Drive – Fixed Assets Folder – Stores invoices, journal entries, and schedules
• Month-End Close Checklist – Includes capitalization and depreciation tasks

7. Exceptions and Special Cases

• Donated Assets: Record donated assets at fair market value on the donation date. Obtain written donor documentation including description and value. Use comparable market prices or appraisals if no donor valuation is provided.
• Capital Project Bundles: If multiple invoices represent a single asset / project, group them as one asset line.
• Grant-Funded Assets: Ensure proper class/customer tagging and confirm funder capitalization rules.
• Partial Use Items: If shared across programs, allocate depreciation across appropriate classes.
• Assets Below Threshold: Expense immediately unless program-specific guidance requires capitalization.

8. Risks and Controls Summary