Fixed Assets Data Conversion: What Every Tax Pro Should Know

Posted by Traci WheelercloseAuthor: Traci Wheeler Name: Traci Wheeler
Email: traci@redmoonsolutions.com
Site: http://blog.redmoonsolutions.com
About: Traci is a member of the executive leadership team and leads our sales and marketing efforts at Red Moon Solutions. She has over ten years of software business experience serving small and large clients in a variety of industries.See Authors Posts (120) on Oct 12, 2011 | 0 comments

When a tax department is evaluating new fixed assets software, they typically want to know the effort involved to convert fixed assets data from their existing fixed assets software package. Rightfully so, since the entire conversion process often makes up the biggest part of any fixed asset software implementation project.

In an effort to provide some perspective around the effort to convert fixed asset data,  I have compiled some thoughts based on my experience on these types of fixed asset software projects.

In the Same Boat

Before you get carried away and think this is a monumental task, it is probably helpful to know that most tax professionals considering a project like this are in or have been in the same boat you are in now.   You are not the only company who has fixed assets data all over the place, or isn’t exactly sure where all of your fixed assets are located. You are not the only company who has office furniture depreciating over various tax lives or hasn’t properly accounted for bonus depreciation.   You are not the only company still using Excel to track book and tax depreciation.  For the most part, every tax professional is in the same boat.  The boat just may come in different shapes and sizes.  So take a deep breath….

Lions and Tigers and IT…Oh My

Larger tax departments who want to convert their fixed assets data from a company’s primary financial management or ERP system, like SAP or Oracle, will often have to contend with IT or ERP project managers in order to get the fixed assets data they want to convert.  Don’t let these people derail your project by insisting there is a lot of work to do in preparation to convert existing fixed asset data. This is not true. Most 3rd party fixed asset software only requires data in a flat file format, such as comma separated or fixed width, for import. Fixed asset software vendors should be able to provide you with a file specification, specifically identifying the required fields from your financial management system.  When going through the process of identifying the fields you need pulled, make sure you look at any additional fields in the financial managements system or ERP that might be helpful for reporting in the new fixed assets software you are purchasing.  For example, fields like state, city and county could be important for property tax filings, or cost center or department information may be helpful for internal reporting.

This is Your Opportunity

Look at what could be considered as a daunting project to convert fixed assets data as an opportunity. This is your chance to review your existing fixed asset ledger and go over information with a fine tooth comb. Review your asset classes and determine if there are any you can get rid of.   Are there incorrect tax depreciation methods and lives on assets that should be corrected? Is bonus depreciation missing on some assets? Are there state books you have been ignoring?  Depending on the software package you select, one thing you may be able to do when you convert fixed assets data is run a parallel Federal income tax book, i.e. one re-calculated by your new system with the correct tax depreciation methods and lives. This will allow you to compare the correctly calculated tax depreciation amounts to your existing fixed asset data once converted.  The calculations can then be compared; differences identified and adjustments made, if necessary.

Don’t Be Afraid to Ask for Help

Whether you do it all yourself or need some assistance, a good fixed asset software vendor should be able to help you considerably in your effort to convert fixed asset data.   They should have a good understanding of tax depreciation rules and the latest tax law regarding fixed assets as well as the technical experience required to navigate through the software.  Guides and templates may also be available to help guide you through the process.

For more detailed information on Red Moon’s approach to converting fixed asset data, check out the Q&A video below.

What other questions do you have about converting data to a new fixed assets software package?  Post your questions in the comments below.