QRT Electricals Ltd. is a mid-sized manufacturing company with a substantial investment in Fixed Assets comprising of Plant & machinery and…

Consideration that shall be taken into account while evaluating the Fixed Assets item shown in the Balance Sheet - (i) Fixed assets, usually, are shown in accounts at cost less depreciation but the accounts do not show the ages of different assets. It is desirable, therefore, to obtain age analysis of various items of fixed assets. (ii) Assets which are old or are obsolete would naturally have to be replaced. It should be seen that their values are not in excess of the value of service that they could be expected to render to the business during the balance period of their active life and the amount they would fetch on sale as scrap. (iii) Title deeds should be verified to ascertain the extent of enterprise's ownership in such assets, like land and building jointly owned by two or more companies or their subsidiaries. (iv) In addition, from a study of the maintenance expenses incurred from year to year, it should be judged whether the assets have been properly maintained. If not, it might be necessary to incur heavy expenditure on repairs to put them in a proper working order. In such a case, an allowance for this factor should be made in the value of assets. (v) More particularly, it should be seen that if assets have been revalued, the increased depreciation charge has been adjusted against profit. (vi) Further, investigator has to assure whether assets whose recoverable amount is less than carrying amount are impaired and requirement of AS 28, "Impairment of Asset”, has been complied. (vii) It would be the duty of the investigating accountant to eliminate idle assets after proper identification from the net worth of the business. However, proper value of the idle assets may be separately added to the value of the business.