All companies have fixed and current assets that enable their operations. However, it is no secret that the identification of long-term property is something not every organization does effectively. As a result, there are many discrepancies regarding the assets of some companies making it hard for auditors to work out their true value. On top of that, companies that do not prepare an accurate long-term property register make it hard for the tax collector to do his job.
Determining fixed assets in the UAE
Fixed assets(long-term property) are usually determined by their nature and use in a company, and it is the work of auditors in Dubai to identify
long-term property. Typically, fixed assets are purchased for long-term use and can be in machinery, land, property and other such equipment. Usually, these property play a significant role in the production process of a company and, as such, are not purchased with the aim of liquidation in the immediate future.
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Criteria used by auditors to identify fixed assets include:
- The asset needs to be tangible and real
A long-term property must be something that can be seen and touched thereby allowing the auditor to attach a value to it. It is hard to find a company investing in a long-term property in the form of an idea because it is not guaranteed how long the owner of the concept or the implementers will be employed. The item must have an appreciating or depreciating asset. - Fixed assets must have a value
long-term property must have a market value so that the management does not end up over or underpricing the item. That way, there are fewer chances of getting into struggles with auditors. It is one of the main reasons you will need the original purchase documents presented to the auditor for further value evaluation. It is important to keep in mind that a fixed asset’s initial value or cost comes in handy when considering any depreciation or appreciation calculations. - An asset has to be owned / controlled by the company
You can never claim that your company owns a particular long-term property when all the documents show that the property is under a private owner. One way auditors identify long-term property is if the company legally owns the asset. The importance of this is that it allows for the proposed fixed assets laws to be applied diligently. - A fixed asset must have an active role in the company
It will make no sense for a company to invest in a long-term property that is irrelevant to its processes. When performing an audit, the officer will be focusing on assets that play a direct role in the production process. However, it is crucial to understand that a legal company has the right to purchase and own any long-term property. Some companies tend to buy irrelevant assets and make it hard to place an accurate value as a fixed asset. - Full ownership/ no charges on an asset
Some long-term property are not acquired at once, and a company might need to make payments in instalments over time. Long-term property should be free from any charges since it is not easy to determine the asset’s rightful owner when payments are not yet completed. When conducting an audit, officers are required to confirm if an asset is wholly owned or is under the attainment process. This should be indicated clearly on the report.
You should know: Steps to Audit the Fixed Assets of a Business in UAE
Need Expert Advice?
Contact the team at Farahat & Co. for professional support and expert insights for businesses operating in the UAE.
Managing fixed assets in the UAE
Farahat & Co have decades of Auditing experience and you count on our expert team to provide you with professional long-term property register services that will take a whole lot of work off your hands. As one of the top auditing firms in Dubai we can closely monitor your long-term property that in turn helps protect your business.
Feel free to contact us for an initial meeting with one of our audit experts today.
