Features of non-current assets
Low mobility funds invested in fixed assets (fixed assets, intangible assets, long-term financial investments) do not constitute a waiver of complex management tasks. But in this case the management is significantly different from the reporting in this section of the decision short-term financial solutions.
The main objective of non-current assets is to ensure their timely updating and effective use.
In the management of non-current assets following tasks:
• identifying possible forms of renewal of fixed assets at the simple and extended basis;
• determine the need for increase of fixed assets for expansion of their business;
• identify possible ways of expansion of fixed assets (building, creating, buying, renting, leasing);
• ensure efficient use of previously existing and newly introduced fixed assets and intangible assets;
• creation of the necessary financial resources to play non-current assets and optimize their structure.
The organizational forms upgrade production facilities on a simple basis are:
- Maintenance - partial replacement of fixed assets (funded by the costs of production);
- Overhaul - a significant recovery of fixed and partial replacement of individual species (part funded by accumulated depreciation and deducted the costs of the enterprise);
- The acquisition of new types of non-current assets - replacement of worn-out fixed assets within accumulated depreciation.
In the expanded reproduction formation (construction, establishment, acquisition) new types of fixed assets carried out with the involvement of additional financial resources (in excess of accumulated depreciation): income, long-term loans, issuance of securities.
To determine the need for growth of fixed assets in the case of expanded reproduction analyzes:
- Required additional space and power to increase the amount of (if not increase rate variability using existing production facilities);
- The balance of fixed assets at the beginning of the planning period;
- The planned disposal of fixed assets due to their physical and moral wear.
It should have sufficient information on the cost of resources and production assets accounting estimates, since the practice of financial management increase fixed assets is always determined only in value terms (for planning needs financial resources).
This method is advisable to use when:
- Useful life of fixed assets is directly determined by the amount of output;
- The amount of output reliably determined (Single)
- Obsolescence of fixed assets is negligible.
The method used in straight-line write-off when the depreciation of fixed assets is most dependent on the period during which they are used (and buildings, office furniture and equipment).
Reduced balance method (accelerated depreciation) is used for those fixed assets that have a maximum return in early working life. This means that the amount is reduced much more quickly under the influence of obsolescence than in the process of physical aging.
In favor of this method is evidenced by the fact that in the first years of service fixed assets can bring more revenue due to lower cost of maintenance and repair.
Holding the company accelerated depreciation policy is an important incentive for the development of scientific and technological progress and innovation activities in the production process. As a result of accelerated depreciation reduced payback period hardware accelerated disposal of old fixed assets, more intense is the accumulation of depreciation, which allows time to buy new equipment and avoid obsolescence of technology.
Substantiating the feasibility of using some methods of depreciation, financial manager should try to maximize not only the amount of accumulated depreciation, but also provide as much value of net cash flow, retained by the Company (the sum of net income from operations and depreciation in the current period).
Constant monitoring of the financial performance of fixed assets should be carried out using the following analytical indicators as capital, fondorentabelnist relative savings of fixed assets as a result of capital increase, the increase in production by increasing assets and so on. Al.
However, the financial manager should ensure the efficient formation of the cash flows related to the acquisition and lease (leasing) of assets.
In evaluating the cash flows associated with different ways of forming non-current assets as preferred option, which provides a minimum flow of payments in a period equal to the period of the lease.
Comparing individual cash flows (purchase of equipment on lease, by a bank loan from its own financial resources) are governed by the following rules:
• Comparison of cash flows is done by bringing them to present value;
• discount rate is set equal for all alternatives;
• For a more objective evaluation of alternative cash flow takes into account the possibility of tax savings (with leasing - by referring to the production costs of the lease payments when buying on credit score - due to interest on loans and depreciation).