Companies with excess cash usually choose between different investment options for their money. These companies evaluate different investments based on the length of time they wish to hold an investment and their desired rate of return. Businesses investment accounting vary differently depending on the type of investments they choose.
While many companies may hold equity investments on their accounting books, financial institutions like banks and investment groups are the primary holders of equity investments. Companies must properly report these items on their investment accounting financial statements for outside stakeholders (external individuals or entities interested in a company, such as banks, investors, lenders or competitors).
Equity investments on investment accounting represent money spend to buy stocks or bonds from another company. These items are held as investments, with the holding company expecting a return on their invested capital. Stocks and bonds are the two most common investment accounting types of equity investments. Stock investments are reported as the price paid for the stock, while bonds should be reported at fair market value.
Equity investments are classified under one of three types of categories: held to maturity, trading or available for sale. Held to maturity investments indicate the company will sell the investments when they mature in value. Trading investments in investment accounting are actively traded by the company, and available for sale are matured investments the company is willing to sell.
Equity investments on investment accounting are reported at the end of each accounting period on the balance sheet company. Bond investment must be revalued at fair market value every time they are reported on the balance sheet. Equity investment accounting guidelines are found in Statement of Financial Accounting Standard No. 115, issued by the Financial Accounting Standards Board (FASB).
Over the past couple of years, we have learned that companies will save a lot of money and enjoy a reduction in administrative manpower by implementing financial asset management systems. There are so many reasons why companies need financial asset management systems. Usually, the primary drivers are visibility and increased efficiencies that lead to reduced manpower, reduction in spending, visibility of inventory, risk management, management reporting, asset reuse, security management, warnings based on asset related events, and visibility of compliance positions.
The key to any financial asset management system is an asset register, usually with functionality built around the records in that register. Some help desk systems have asset registers, although they rarely give the functionality and accessibility required to effectively manage assets. Low cost asset registers mostly do not give the flexibility to configure their application as needed.
If you are looking for a financial asset management system, make sure that you pick the one with features that will jive with the needs of your company. Go with financial asset management systems that has the following attributes.
- A simple asset register to assist with corporate governance
- Asset KPI reports and asset performance reporting
- Asset lifestyle management
- Financial asset management and depreciation calculation
- Keeping machinery maintained with planned maintenance
- Tagging and periodically barcoding scanning assets to ensure correct inventory
If you are a company that will usually gain all of the financial asset management system benefits above that are relevant to them, and the following unexpected financial asset management system benefits will usually apply.
- Easy reporting on elements of the inventory by different classifications
- Reuse and visibility of assets placed in storage
- Visibility of the reliability of assets by user, model and manufacturer
- Reduction in asset purchase costs via reuse and price comparison
- Asset register automatically kept up to date via integration to other systems
- Other systems kept up to date via integration with the asset manager software
- Email alerts on important events like capital acquisitions and disposals
- Help desk that instantly attach an asset to an incident to facilitate quick resolution