What needs to be on your Asset Registry?

[Intothedeepbluesea]

What needs to be on your Asset Registry, I'm a Sole Prop?

Every little piece of equipment bought, even a stapler/usb cable etc?
What happens if you upgrade the computer, bigger hardrive etc does go on the registry?
Is there a value beneath which it does not need to be on the registry?

[Beancounter]

Apply the definition: "An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity (IASB Framework)." For tax purposes you can expense anything under the value of R7000 and record the rest in the asset register.

If a computer is upgraded, the value of the upgrade is added to the carrying value of the asset in the asset register and depreciated accordingly.

[Intothedeepbluesea]

So anything under R7000 does not need to be on the asset registry?
Say a laptop is bought for R6500 this financial year, next year a SSD drive is fitted for R1800, they both recorded as expenses because they are under R7000 but don't they need to go on the asset registry?

[CLIVE-TRIANGLE]

The guidelines below relate to any asset register. However a sole prop does not have to comply with any recognised standard, but if you do wish to keep a register then this is what it should contain at the minimum:

1. A decent description of the asset and when and from whom it was purchased, its estimated useful life, and the purchase price. This is the permanent information relating to the item.
2. Annually, the amount of depreciation charged to the income statement, the accumulated depreciation and the carrying value (cost less accumulated depreciation).
3. Annually, the exact same exercise but this time using the wear and tear allowances approved by SARS. The carrying value is known as the tax value.
4. If any items are disposed of or scrapped, record it including the amount it was sold for, to who and so on.

A word on the R7000 issue.
SARS will allow you to expense any acquisition up to R7000 in year 1. But this is in fact a wear and tear charge and affects tax, not your financials or accounting records. You might well have a policy that expects you to expense smaller items, but R7000 is somewhat high for an SME or sole prop. Once you have decided on an appropriate limit, items below that limit do not feature in the register as they are charged as expensed equipment in the income statement. So, for your own financial statement purposes you may well capitalise the item, but for tax purposes you may well expense the same thing.

The R7000 allowed by SARS is for a complete set, as opposed to items comprising the set.

Subsequent additions to existing assets, for both tax and financial purposes, must be considered in relation to the main item. In other words, if the laptop was expenses, the drive you are adding to it is also expensed. If it was capitalised, then so too is the addition even if less than the limit.

Subsequent additions to existing items must also be considered for appropriate treatment from a maintenance point of view. If the addition "makes it better", then generally it is capital expenditure. If the addition replaces something that was broken, then it is maintenance. Sounds simple but often it is not, especially when it relates to extensive plant and machinery, but the principle remains true.

[Intothedeepbluesea]

Thanks for the helpful advice chaps, let me just clarify, I'm referring to the asset registry that SARS expects you to keep , what needs to be on that registry and how is equipment less than R7000 that is treated an expense in the year of purchase reflected if at all on the registry?

[Intothedeepbluesea]

^^ Anyone?

[CLIVE-TRIANGLE]

Basically, exactly what I said above.

SARS have no asset register requirement. Good accounting practise and various international standards require it. On the other hand, if SARS were to question or audit any aspect of capital expenditure or the subsequent allowances arising therefrom, having a register will certainly stand you in good stead.

[Basment Dweller]

Do you need to include real estate assets on your register as well? What about gold, art, etc?

[Mike C]

SARS have no asset register requirement.

Unless, of course, you are a provisional tax payer and have to list your Assets and Liabilities each year.

[CLIVE-TRIANGLE]

Yip, but that's just totals per category.

Now if they ask for detail of whats in the totals, or detail of the depreciation / wear & tear deduction, then that's when the register will help you.

[CLIVE-TRIANGLE]

Do you need to include real estate assets on your register as well? What about gold, art, etc?

Unless your are a private person, yes.

If you are a private person it is not necessary, but if the assets generate trading income, then yes it is advisable.

[Intothedeepbluesea]

Thanks Clive, can you help me apply this to a real life situation, business equipment purchased, R3500 backup hard drives, R5800 computer, R12500 camera lens, do all those goods go on the asset registry or just the R12500 lens because it's above R7000?

[CLIVE-TRIANGLE]

I’ll try to clarify on the assumption that you are a sole proprietor and these distinctions are for tax purposes only.

All fixed asset acquisitions should be entered in the asset register. That would then exclude items that you immediately expensed in line with the tax concession.

The wear and tear allowance for tax purposes is the next consideration. Each year you charge what SARS allows until the full value is exhausted.

This is where the R7000 story comes in. If it is a single item, say a desk for a particular office, and is less than R7000, you may claim the full amount in year 1. If it is a backup drive that is part of your IT installation, then probably you should not.

Certainly a camera lense is part of the camera setup and even if it were less than R7000 you would not expense it.

Another example is a lining for an LDV. You would have acquired the LDV and treated it as a fixed asset. Three months or weeks later you have the loadbin coated for R6000. That coating is part of the LDV and should not be expensed.

Your example of backup drives; SARS may be of the opinion that it is part of your IT setup and therefore cannot be expensed. Similarly, computer stations frequently comprise a number of components, perhaps including a printer, that individually are less than R7000, but together are more.

Adding 2 chairs to the suite in your boardroom should not be expensed.

Adding a desk and chair to a new reception area you just installed, can be expensed.

So, in a nutshell, the asset register contains details and annual wear and tear of assets that you did not expense.

[Intothedeepbluesea]

What needs to be on your Asset Registry?

But if SARS states that any equipment whatever ever it may be must be expensed if it is a purchase invoiced at below R7000, why would you not expense for example a camera lense that costs R6500 or the R3500 backup hard drive?

I couldn't find any exclusions other than you can't take one invoiced purchase thats above R7000 and try separately expense individual items on the invoice. Say I bought bought 3 backup harddrives at once each at R3500, total R10500 that can't be expensed. But then again that makes no sense, can I buy the 3 hard drives one a day over 3 consecutive days and then be entitled to expenses them?

[CLIVE-TRIANGLE]

Wear and Tear allowances.pdf

The attachment should help, especially 4.3.5