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Total No of Assets 20
Marked 01
Unmarked 07
Missing 12
5.1.1 CONCLUSION
This Project which was given to me in group with another internee, by Miss Kiran (Fixed Assets and Depreciation Section, Finance Department) on directions from our honorable sir A.N Khokar (Cost Accountant, Finance Department), was really a good experience for us. During this whole process we visited a number of places throughout the factory, familiarized with different places & people and learned a lot of things from them. We also faced some problems in different areas .Sometimes we were either offered no cooperation at some places or even not allowed to enter some offices. However, these problems helped us learn how to cope with problems that we may face in our practical life in the future. In a nutshell, what we saw & faced during this whole course of events and what we recommend, are summarized as follows:-
5.1.2 FINDINGS:-
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Some assets carried no asset code
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Some assets were not even found because the persons, to whom these were provided, were transferred.
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Some assets carried codes that did not match those in the list.
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Computer CPUs and monitors were interchanged among the departments and the asset lists were not updated accordingly.
5.1.3 PROBLEMS FACED:-
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Some assets such as cars, trucks and trolleys etc were in use some where in the factory and hence were difficult for us to verify.
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Some assets were either greater or lesser in number than those mentioned in the list.
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Some assets such as graphic equalizers and audio amplifiers etc in the conference room were locked up in glass shelves and therefore were difficult to be verified.
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Assets like multimedia projectors, air conditioners and Insecta flash etc were fixed at height so their asset codes were difficult to be recognized.
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There were some areas (such as Generator Room and certain Offices) to where we were granted no access and thus we were unable to verify assets over there.
5.1.4 RECOMMENDATIONS:-
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Fixed assets verification is a very technical job that needs true knowledge of these assets. So it must be conducted through responsible persons like supervisors etc. There should be at least one person in each department to be responsible for keeping an updated record of assets in his/her department.
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Some assets were either sent for DOFA or Repair for years, yet were present on the list. So there must be some means through which such changes might be properly recorded.
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If possible, the fixed assets inventory must be updated on a quarterly basis.
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There were some assets which were not worth the range of fixed assets such as calculators, but were present on the fixed assets list. They must be removed from the inventory so that a true picture may come forth.
PROJECT#2
5.2 CONSTRUCTION OF INTANGIBLE ASSETS MONITOR
5.2.1 PROJECT OBJECTIVES:
The major objectives of this project were to:
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Understand the importance of intangible assets for a company
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Understand the newly employed concept of measuring intangible assets( called the knowledge management)
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Learn about the important factors of an intangible asset monitor.
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Identify factors that may contribute to/constitute the intangible assets of Pakistan Tobacco Company.
And finally:
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Design an intangible asset monitor for Pakistan Tobacco Company
5.2.2 INTANGIBLE ASSETS
“The term “Intangible Asset” is used in accounting to denote long term property items without physical characteristics.”
From a strictly legal point of view, such assets as shares of stock, bonds and claims against customers are regarded as intangibles. For the accountant, however, the term is limited to such properties as patents, copy rights, trademarks, franchises, leaseholds and goodwill.
5.2.3 THE NATURE OF INVESTRMENT IN INTANGIBLE ASSETS
When a company invests in material assets like machines, or computers, the money is paid out of liquid funds, and a corresponding amount is booked as an asset on the balance sheet under a heading like "machinery". In accounting terms, there has been a negative cash flow, but no expenditure. The cost is incurred gradually, as the asset is depreciated.
When a company invests in an intangible asset like a research program or an entrance to a new customer segment, it is not generally permitted to record the value of the research as an asset on the balance sheet. The investment thus appears both as a negative cash flow and as a cost item. Both types of investment are inspired by the same motive; to achieve higher profitability in the long term, by sacrificing cash flow in the short term. The difference in accounting treatment, however, is very confusing and is made more so by the fact that the "cost" of intangible investments can take forms other than direct payments from cash reserves. It may take the form, for example, of accepting an assignment that yields little cash revenue but has great publicity value, or seems likely to enhance competence. Here again the intangible asset is "financed" by "invisible" equity.
5.2.4 WHY NON FINANCIAL MEASURE FOR THE INTANGIBLE ASSETS
If we measure the new with the tools of the old, we will not "see" the new. Any measurement system is limited by Heisenberg´s uncertainty principle (1927) which says that it is impossible to measure simultaneously the speed and the position of particles. this means that the observer is always involved in the measurement and that the physical world does not have well-defined attributes. This is true for the world of business too. There is no difference between money measures and other measures. Both are uncertain and all are dependent on the observer. There exist no "objective" measures. The main reasons why the money measures seem more "objective" and "real" are that they are founded on implicit concepts of what a company is and that the measures have been around for so long that they are guided by definitions and standards.
Once measures have been selected, they color what we see and how we act, and the problem with translating actions into money is that very few people in an organization handle money directly. Most of them work by using their competencies in the service of customers. Money is merely a proxy for human effort and the 500-year-old system of accounting sheds little light on the vital processes in organizations whose assets are largely non-monetary, and intangible.
Most companies measure at least some of their intangible assets and they use non-monetary indicators particularly for measuring operational efficiency. Operational efficiency – the efficiency of the Internal Structure as I call it – has been measured at least since the birth of the industrial organization. The other two intangible areas; External Structure and Internal Structure are still not monitored on a regular basis by most companies. The problem is not that "intangible measures" are difficult to design. The problem is more what to measure and that the outcomes seem difficult to interpret.
5.2.5 A STANDARD APPROACH TO MEASURING AND PRESENTING INTANGIBLE ASSETS (THE INTANGIBLE ASSETS MONITOR):
A standard for measuring and presenting Intangible Assets could be:
The intangible assets are categorized into three:
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External to the organization
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Internal to the organization (but outside the individual employees)
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Individual (internal to the individual employees)
Also:
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Indicators for Financial or tangible assets are presented as the fourth category.
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Indicators are a combination of financial and non-financial.
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The indicators are presented in a coherent fashion together in a separate section or supplement.
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The traditional accounting system and the rest of the Annual Report remain unchanged.
The "invisible" intangible part of the balance sheet can be classified as a family of three:
Fig 5.1 The Intangible Assets Monitor Framework
Their details are as follows:
(a) Individual Competence
It means people's capacity to act in various situations. It includes skill, education, experience, values and social skills. People are the only true agents in business; all assets and structures, whether tangible physical products or intangible relations, are the result of human action and depend ultimately on people for their continued existence. People tend to be loyal, if they are treated fairly. That is why companies are generally willing to pay some kind of compensation to those who retire, or have to be laid off. This kind of compensation often takes the form of redundancy pay, umbrella agreements ("golden parachutes") and pensions. Although such commitments are not recorded as liabilities in the balance sheet, they can be seen as pledges or commitments, like leasing or rental contracts, and thus a form of invisible financing of employee competence.
Table 5.4
THE INTANGIBLE ASST MONITOR:
TOTAL MARKET VALUE
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TANGIBLE ASSEST
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THE INTANGIBLE ASSETS
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EXTERNAL STRUCTURE
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INTERNAL STRUCTURE
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PEOPLES’ COMPETENCE
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2004
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2003
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2002
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2004
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2003
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2002
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2004
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2003
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2002
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GROWTH
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INNOVATION
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EFFICIENCY
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STABILITY
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(b) Internal structure
Consists of a wide range of patents, concepts, models, and computer and administrative systems. These are created by the employees and are thus generally "owned" by them.
(c) External structure
Consists of relationships with customers and suppliers, brand names, trademarks and reputation, or "image". Some of these can be considered legal property, but the bond is not as strong as in the case of internal assets because investments in them cannot be made with the same degree of confidence. The reasons why the value of a relation seems invisible today is because it does not have a generally accepted definition and that it is not measured according to a standard. But these drawbacks do not mean that it is impossible or unnecessary to measure it, only that comparison between companies and over time are difficult to make.
5.2.6 THE INTANGIBLE ASSET MONITOR FOR PKAISTAN TOBACCO COMPANY:
According to the above stated framework the important factors/indicators that may be included in designing an intangible asset monitor for Pakistan Tobacco Company are as follows:
Table 5.5
Intangible Asset Factors/Indicators for PTC
EXTERNAL STRUCTURE
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INTERNAL STRUCTURE
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COMPETENCE
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Farmers
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Internal policies
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Workers
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Customers
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Management & Administration
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Trainings
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Suppliers
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Processes
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