Guideline on Common Financial Management Business Process 4.1 - Manage Other Capital Assets

This guideline defines Manage Other Capital Assets, which begins with the development or acquisition of a capital asset (excluding real property) and ends with its disposal. Capital assets are tangible assets that are purchased, constructed, developed or otherwise acquired. ^{See footnote [5]} Capital assets include purchased computer software, in-house developed software, computer hardware, equipment, fleet vehicles, operational heritage assets, leasehold improvements, assets acquired by capital leases, ^{See footnote [6]} and betterments that prolong the period of usefulness or improve the functionality of an asset. ^{See footnote [7]}

This business process interacts with Manage Planning and Budgeting (Business Process 1.1) by providing input to the development of the department's investment plan and capital budget, which will drive expenditures for the life-cycle management of assets.

This guideline covers the following subprocess groups:

• Create or Update Asset Record;
• Maintain Asset Record; and
• Record Asset Disposal.

Separate business processes will be developed for the financial management of real property and infrastructure assets (Business Process 4.2) and inventory (Business Process 4.3).

Some financial management activities described in this guideline are also related to internal controls. The intent is neither to provide a complete listing of controls nor to produce a control framework, but the process description may provide useful content for the development of a department's control framework.

The remainder of this guideline is structured as follows. Section 4 provides an overview of the organizational roles that carry out Manage Other Capital Assets. Section 5 presents a detailed description of the Manage Other Capital Assets business process, including subprocess groups, subprocesses, activities and responsible roles. Appendix A provides definitions of terminology used in the guideline, and relevant abbreviations are listed in Appendix B. Appendix C describes the methodology used in the guideline, and Appendix D elaborates on the roles and responsibilities outlined in Section 4. A model asset count instructions document is included in Appendix E for information purposes.

The following references apply to this guideline.

3.3.1 Acts and Regulations

• Federal Accountability Act
• Financial Administration Act
• Surplus Crown Assets Act

3.3.2 Policy Instruments

• Accounting Standard 3.1 – Treasury Board – Capital Assets
• Accounting Standard 3.1.1 – Treasury Board – Software
• Common Services Policy
• Directive on Disposal of Surplus Materiel
• Directive on Expenditure Initiation and Commitment Control
• Directive on Fleet Management: Executive Vehicles
• Directive on Fleet Management: Light Duty Vehicles
• Directive on Losses of Money or Property
• Directive on the Stewardship of Financial Management Systems
• Policy Framework for the Management of Assets and Acquired Services
• Policy on Financial Management Governance
• Policy on Internal Control
• Policy on Investment Planning – Assets and Acquired Services
• Policy on Learning, Training, and Development
• Policy on Management of Materiel
• Policy on the Management of Projects
• Policy on the Stewardship of Financial Management Systems
• Standards on Knowledge for Required Training

3.3.3 Other References

• Crown Assets Distribution Directorate
• Financial Information Strategy (FIS) Accounting Manual ^{See footnote [8]}
• Guide to Costing
• Guide to Fleet Management, Chapter 1: “Light-Duty Vehicles”
• Guide to Fleet Management, Chapter 2: “Executive Vehicles”
• Guide to Management of Materiel
• Guide to the Management of Movable Heritage Assets
• Profile of Government of Canada Internal Services

The following organizational roles act in support of legislation, such as the Financial Administration Act and the Federal Accountability Act, and define policy or processes that must be followed.

• The Office of the Comptroller General – Financial Management Sector is the policy authority for financial management.
• The Office of the Comptroller General – Acquired Services and Assets Sector is the policy authority for the management of real property and materiel, investment planning, project management and procurement across the government.
• The deputy head is responsible for:
  • Providing leadership by demonstrating financial responsibility, transparency, accountability and ethical conduct in financial and resource management; ^{See footnote [9]} and
  • Ensuring sound stewardship of the materiel entrusted to, and used by, the organization, ^{See footnote [10]} including compliance with legislation, regulations, Treasury Board policies and financial authorities.

The following organizational roles act in response to financial management policy and process requirements—for example, from the Office of the Comptroller General – Financial Management Sector and from deputy heads.

• The corporate finance role supports:
  • Deputy heads and chief financial officers in meeting their financial management accountabilities as listed in the Policy on Financial Management Governance; ^{See footnote [11]}
  • Departmental and business unit-level activities related to resource management, such as supporting the financial component of the departmental planning process, including the investment plan.
• The financial services role carries out the day-to-day transactional financial management operations. This organizational role fulfills financial management responsibilities for departmental transactions—for example, recording journal entries to update revenues, expenses, assets and liabilities. Journal entries related to capital assets include amortization; adjustments resulting from periodic reviews of assets under construction, physical asset counts and asset base assessments; disposals; and write-downs.

The following organizational roles act in response to policy and process requirements for the management of real property and materiel, investment planning, project management and procurement across the government. These roles are not financial in nature but are included in order to provide a comprehensive process description.

• The materiel services role is responsible for the development and compliance monitoring of materiel management policies, processes and procedures. In addition, this role provides oversight of the day-to-day operations of transactional asset and acquired services, which includes ensuring the existence of asset records.
• The responsibility centre manager role is the custodian of assets, or the role responsible for a group of custodians of assets.

The following organizational role provides a central service to other government departments.

• The Department of Public Works and Government Services – Crown Assets Distribution Directorate is responsible for the sale of surplus federal goods, including computers, office equipment, vehicles, and other capital assets, as defined in the scope section of this guideline. ^{See footnote [12]}

As illustrated in Figure 3, the Manage Other Capital Assets Level 2 business process comprises seven subprocesses (4.1.1 to 4.1.7). These are arranged in three subprocess groups: Create or Update Asset Record, Maintain Asset Record and Record Asset Disposal.

Note A: The symbol indicates that one or more of the five subprocesses 4.1.2 to 4.1.6 may be completed after subprocess 4.1.1.

Note B: The  symbol indicates that both of the decisions that follow (“Update asset record?” and “Journal entry required?”) must be considered.

Note C: The  symbol indicates that the decision (“Disposal to a third party?”), “End” and Manage Financial Close (Business Process 8.2) must be followed.

Note D: The shaded box indicates that Undertake Ongoing Asset Repairs and Maintenance (Subprocess 4.1.3) is outside the scope of the Manage Other Capital Assets business process.

The subprocesses within each subprocess group and the roles and responsibilities relevant to each subprocess are summarized below.

Create or Update Asset Record

• Create or Update Asset Record (Subprocess 4.1.1): An asset record is created or updated in the departmental financial and materiel management system, generally as a result of the decision to capitalize an asset or its component parts during Manage Procure to Payment (Business Process 3.1) or during Manage Inventory (Business Process 4.3) when the asset is constructed with items previously held as inventory. An asset record may also need to be created or updated when the asset is acquired through other means—for example, a transfer from another government department, a donation, or the exercising of a bargain purchase option. An analysis of assets under construction, a periodic asset count, a periodic asset assessment, or the authorization of a disposal may also result in a requirement to create or update the asset record and, possibly, the general ledger. Materiel services or, in certain cases, the responsibility centre manager, is responsible for this subprocess group.

Maintain Asset Record

One or more of the following subprocesses will repeat cyclically during the life cycle of an asset, based on the asset's state of completeness and status. The corporate finance role, including the chief financial officer and the corporate finance function, is accountable for the resulting financial reporting, and is supported by the responsibility centre manager and materiel services in executing the activities of this subprocess group.

• Calculate Monthly Amortization (Subprocess 4.1.2): Amortization is calculated and recorded by financial services according to department-specific procedures. Amortization is based on asset class and estimated useful life or capacity and is recorded monthly, starting on the first day of the month following the month when the asset came into service. ^{See footnote [13]}
• Undertake Ongoing Asset Repairs and Maintenance (Subprocess 4.1.3): Repairs and maintenance are undertaken to ensure that an asset fully, effectively and efficiently meets the requirements of the organizational program it supports. When economically feasible, an asset is repaired, refinished and reused rather than replaced. ^{See footnote [14]}  Departments should have procedures to differentiate between betterments, which are capitalized and processed as part of this business process, and repairs and maintenance, which are expensed and require no additional consideration. ^{See footnote [15]} The activities of this subprocess are strictly a materiel management function and are therefore outside the scope of the Manage Other Capital Assets business process.
• Conduct Periodic Analysis of Assets Under Construction (Subprocess 4.1.4): An analysis of assets under construction is conducted periodically to ensure that asset records are updated appropriately during construction and that related expenses are capitalized as required.
• Conduct Periodic Physical Asset Count (Subprocess 4.1.5): A physical asset count is conducted periodically to confirm the existence of assets and to ensure the accuracy of the asset records in the departmental financial and materiel management system.
• Conduct Periodic Asset Assessment (Subprocess 4.1.6): An asset assessment is a strategic or an operational review of part or all of the organization's asset base. It measures the extent to which the asset base continues to meet the organization's needs and validates the reasonableness of the value recorded in the departmental financial and materiel management system. The assessment may be conducted periodically or for a specific event—for example, the review of a departmental program.

Record Asset Disposal

• Process Asset Disposal (Subprocess 4.1.7): Assets are formally delisted from the department's asset records when authorized by the responsibility centre manager with the delegated authority. Materiel services is responsible for the physical disposal of an asset, and corporate finance is responsible for recording the disposal for financial reporting purposes once the physical disposal of the asset is complete.

This subprocess group involves creating and keeping capital asset records up to date. Accurate asset records support decision making through the ongoing measurement of financial performance, physical condition, functionality and use of assets.

Accounting Standard 3.1 – Treasury Board – Capital Assets defines capital assets as tangible assets that are purchased, constructed, developed or otherwise acquired and that:

1. Are held for use in the production or supply of goods or in the delivery of services or to produce program outputs;
2. Have a useful life extending beyond one fiscal year and are intended to be used on a continuing basis; and
3. Are not intended for resale in the ordinary course of operations. ^{See footnote [16]}

Accounting Standard 3.1 – Treasury Board – Capital Assets also provides additional guidance on elements that department-specific policy and procedures should include:

• Categories of costs or items that should be capitalized—for example, leasehold improvements and betterments;
• Establishment of a minimum threshold for capitalization, which may be less than the recommended $10,000;
• Valuation of capital assets obtained by means other than the typical acquisition by purchase—for example, constructed or obtained through donations or transfers from other departments;
• Factors to be considered in recording assets using the whole asset approach or the component approach;
• Amortization approach for the various classes of capital assets;
• Valuation of assets purchased under lease; and
• Transfer of capital assets between departments.

5.2.1 Create or Update Asset Record (Subprocess 4.1.1)

An asset record is created or updated in the departmental financial and materiel management system, generally as a result of the decision to capitalize an asset or its component parts during Manage Procure to Payment (Business Process 3.1) or during Manage Inventory (Business Process 4.3) when the asset is constructed with items previously held as inventory. An asset record may also need to be created or updated when the asset is acquired through other means—for example, a transfer from another government department, a donation, or the exercising of a bargain purchase option. An analysis of assets under construction, a periodic physical asset count, a periodic asset assessment, or the authorization of a disposal may also result in a requirement to create or update the asset record and, possibly, the general ledger. The information accumulated in the asset record supports the monitoring of asset performance and helps ensure that repairs, refurbishing and replacements are carried out before the asset becomes unserviceable, uneconomical or both. ^{See footnote [17]}

Figure 4 depicts the Level 3 subprocess flow for Create or Update Asset Record.

5.2.1.1 Activities

Materiel services, or in certain cases, the responsibility centre manager, obtains information about a new or an existing asset (Activity 4.1.1.1 – Obtain Asset Information). When the information pertains to a new asset—for example, purchase or construction data and asset class), an asset record is created in the departmental financial and materiel management system (Activity 4.1.1.2 – Create Asset Record). When the information pertains to an existing asset—for example, monthly amortization or a betterment—the asset record is updated (Activity 4.1.1.3 – Update Asset Record). In the case of an asset transferred from another department, the historical information in that department's asset record should follow the asset.

The following are examples of events that require an update of the asset record:

• A betterment is made to an existing asset;
• A discrepancy is identified during a periodic physical asset count or a periodic assessment of the asset base;
• An asset under construction is now complete and in service; or
• The calculated amount from Calculate Monthly Amortization (Subprocess 4.1.2) is added to the individual asset record.

The activities within this subprocess ensure that the asset sub-ledger is kept up to date.

5.2.1.2 Roles and Responsibilities

Materiel services is accountable for creating the asset record, with input from the responsibility centre manager.

Table 1 provides an overview of roles and responsibilities, using the Responsible, Accountable, Consulted and Informed (RACI) approach. These roles and responsibilities are further described in Appendix D.

Table 1. Create or Update Asset Record (Subprocess 4.1.1) – RACI

Activity	Related Data	Responsible	Accountable	Consulted	Informed	Authoritative Source
Legend CF: corporate finance DFMS: departmental financial and materiel management system FIN: financial services MS: materiel services N/A: not applicable NATO: North Atlantic Treaty Organization RCM: responsibility centre manager Note A: The related data, roles and responsibilities, and authoritative source are the same for activities 4.1.1.2 – Create Asset Record and 4.1.1.3 – Update Asset Record).
4.1.1.1 Obtain Asset Information	Acquisition date All costs (including additions and “in service” costs) Amortization amount Amortization method Asset class Asset identification number Custodial responsibility centre Description “In service” and “out-of-service” date Location NATO Stock Number (if applicable) Performance measurement indicator data Project data (e.g., project code, time sheets and projected “in service” date) Purchase data (e.g., invoice, supplier, warranty information, purchase order and contract) Quantity Salvage value Serial and model number (if applicable)	MS, RCM	RCM	CF, FIN	N/A	DFMS
4.1.1.2 Create Asset Record See table 1 Note A 4.1.1.3 Update Asset Record See table 1 Note A	Acquisition date All costs (e.g., additions and “in service” costs) Amortization amount Amortization method Asset class Asset identification number Asset status Betterment reference number (if applicable) Custodial responsibility centre Description Estimated useful life or capacity “In service” and “out-of-service” date Location NATO Stock Number  (if applicable) Performance measurement indicator data Project data (project code, time sheets and projected “in service” date) Purchase data (e.g., invoice, supplier, warranty information, purchase order and contract) Quantity Salvage value Serial and model number (if applicable)	MS, RCM	MS	CF, FIN, RCM	CF, FIN, RCM	DFMS

The subprocess group involves subprocesses that may be performed cyclically to ensure that:

• Assets are amortized appropriately;
• Repairs, maintenance and betterments are identified, properly differentiated, undertaken and recorded;
• Assets under construction are accurately converted into amortizable assets upon completion, and put into service; and
• Asset records are adjusted, as required and in a timely manner, to correct discrepancies identified during a periodic physical asset count or a periodic assessment of the asset base.

The subprocesses of the Maintain Asset Record subprocess group should be completed at a frequency and in an order appropriate to the department, taking into account the life cycle of the asset. Table 2 provides guidance on which subprocesses apply to an asset under construction, a completed asset that is not in service, or a completed asset that is in service. ^{See footnote [18]} One or more of the subprocesses within this subprocess group will repeat cyclically throughout the life cycle of the asset, according to the asset's state of completion and status.

Table 2. Maintain Asset Record Subprocess Group – Decision Table

Subprocess	Asset State of Completion and Asset Status
	Asset Under Construction	Completed Asset – Not In Service	Completed Asset – In Service
4.1.2 Calculate Monthly Amortization	Does not apply	Does not apply	Applies
4.1.3 Undertake Ongoing Asset Repairs and Maintenance	Does not apply	Applies	Applies
4.1.4 Conduct Periodic Analysis of Assets Under Construction	Applies	Does not apply	Does not apply
4.1.5 Conduct Periodic Physical Asset Count	Applies	Applies	Applies
4.1.6 Conduct Periodic Asset Assessment	Applies	Applies	Applies

Conduct Periodic Physical Asset Count (Subprocess 4.1.5) and Conduct Periodic Asset Assessment (Subprocess 4.1.6) collectively support the deputy head's responsibility for ensuring the appropriate stewardship of assets, specifically, “that the overall extent to which their materiel assets meet program requirements is measured by an ongoing and systematic assessment of the physical condition, functionality, use and financial performance of these assets against established targets based on appropriate benchmarks.” ^{See footnote [19]}

Departments may wish to develop an integrated, risk-based approach to ensure that a physical asset count and a strategic assessment of the asset base are conducted at a frequency that meets the requirements of departmental capital investment, asset management and financial management.

5.3.1 Calculate Monthly Amortization (Subprocess 4.1.2)

Financial services calculates and records amortization for capital assets that are in service. Amortization is recorded monthly, starting on the first day of the month following the month when the asset came into service. ^{See footnote [20]}

Figure 5 depicts the Level 3 subprocess flow for Calculate Monthly Amortization.

5.3.1.1 Activities

Amortization is calculated according to department-specific procedures and is based on the class and the estimated service life of the asset (Activity 4.1.2.1 – Calculate Amortization). The estimated service life or capacity is linked to the expiration of economic benefits, which can be measured in years, total units of output, or total hours of operating time. ^{See footnote [21]} The section entitled “Amortization of capital assets” of Accounting Standard 3.1 – Treasury Board – Capital Assets provides direction on selecting the appropriate amortization method.

The calculation is verified to ensure reasonableness relative to, for example, historical calculations or the estimated service life of the asset (Activity 4.1.2.2 – Verify Reasonableness of Amortization). A verification of reasonableness may also occur when changes are made to the asset record—for example, the recording of an impairment, a betterment, or a change in useful life or capacity. Although the calculation of amortization may be an automated process in the departmental financial and materiel management system, it still requires verification. When an error is identified, the amortization is corrected (Activity 4.1.2.3 – Make Correction).

The verified calculation is used to update the accumulated amortization in the asset record during Create or Update Asset Record (Subprocess 4.1.1), as well as the accumulated amortization account and the corresponding amortization expense in the general ledger. A journal entry is recorded to update the general ledger (Activity 4.1.2.4–Record Journal Entry). (Further information on preparing the journal entry is available in the FIS Accounting Manual.) The process flow then continues to Manage Financial Close (Business Process 8.2).

5.3.1.2 Roles and Responsibilities

Financial services is responsible, and corporate finance is accountable, for calculating and recording the amortization expense. The responsibility centre manager is consulted to confirm the financial coding and the “in service” (or “out-of-service”) date, and materiel services is consulted for any additional details.

Table 3 provides an overview of roles and responsibilities, using the Responsible, Accountable, Consulted and Informed (RACI) approach. These roles and responsibilities are further described in Appendix D.

Table 3. Calculate Monthly Amortization (Subprocess 4.1.2) – RAC

Activity	Related Data	Responsible	Accountable	Consulted	Informed	Authoritative Source
Legend CF: corporate finance DFMS: departmental financial and materiel management system FIN: financial services MS: materiel services N/A: not applicable RCM: responsibility centre manager Note A: The related data, roles and responsibilities, and authoritative source are the same for activities 4.1.2.1 – Calculate Amortization, 4.1.2.2 – Verify Reasonableness of Amortization, and 4.1.2.3 – Make Correction.
4.1.2.1 Calculate Amortization See table 3 Note A 4.1.2.2 Verify Reasonableness of Amortization See table 3 Note A 4.1.2.3 Make Correction See table 3 Note A	Accumulated amortization All costs (including additions, “in service” costs) Amortization amount for the period Amortization method Asset class Financial coding “In service” and “out-of- service” date Net book value Salvage value Service life	FIN	CF	MS, RCM	N/A	DFMS
4.1.2.4 Record Journal Entry	Accumulated amortization All costs (including additions and “in service” costs) Amortization amount for the period Amortization method Fair market value Financial coding	FIN	FIN	MS, RCM	CF	DFMS

5.3.2 Undertake Ongoing Asset Repairs and Maintenance (Subprocess 4.1.3)

Repairs and maintenance are undertaken to ensure that an asset fully, effectively and efficiently meets the requirements of the organizational program it supports. When economically feasible, an asset is repaired, refinished and reused rather than replaced. ^{See footnote [22]} The repair and maintenance expenditures are processed during Manage Procure to Payment (Business Process 3.1), using a purchase order, a contract, an acquisition card or a fleet card. Because the physical undertaking of repairs and maintenance is strictly a materiel management function, there is no corresponding Level 3 process flow or Responsible, Accountable, Consulted and Informed (RACI) table for this subprocess.

It is important to determine whether an expenditure covers repairs and maintenance, which are expensed, or betterments, which are capitalized. Repairs and maintenance help maintain the functionality of the asset, whereas betterments are alterations or modernizations that appreciably prolong the usefulness or improve the functionality ^{See footnote [23]} of the asset or one of its component parts. When the nature of the expenditure cannot be easily determined, the cost should be expensed, in accordance with the accounting principle of conservatism. ^{See footnote [24]}

To support life-cycle management decision making, the Guide to Management of Materiel should be consulted when undertaking repairs and maintenance of capital assets. For repairs and maintenance of fleet vehicles, the Directive on Fleet Management: Light Duty Vehicles; the Directive on Fleet Management Executive Vehicles and the Guide to Fleet Management, Chapter 1: Light-Duty Vehicles and Chapter 2: Executive Vehicles, should be consulted. For repairs and maintenance of movable heritage assets, the Guide to the Management of Movable Heritage Assets should be consulted.

5.3.3 Conduct Periodic Analysis of Assets Under Construction (Subprocess 4.1.4)

An analysis of assets under construction (AUC) is conducted periodically to ensure that asset records have been updated appropriately during construction and that related expenses have been capitalized as required. A physical count of AUC is also recommended and can be completed as part of this subprocess or during Conduct Periodic Physical Asset Count (Subprocess 4.1.5) or Conduct Periodic Asset Assessment (Subprocess 4.1.6). Figure 6 depicts the Level 3 subprocess flow for Conduct Periodic Analysis of Assets Under Construction.

5.3.3.1 Activities

Using the asset records in the departmental financial and materiel management system, financial services or materiel services compiles a listing of all AUC (Activity 4.1.4.1 – Compile AUC Listing). The responsibility centre manager, materiel services or financial services assesses the status of each AUC (Activity 4.1.4.2 – Analyze AUC).

Previously expensed AUC-related expenditures—for example, salary and professional services—should be accumulated and capitalized in the asset record regularly. In the case of software, section 2 of Accounting Standard 3.1.1 – Treasury Board – Software provides guidance on capitalizing expenditures. The journal entry is recorded in the departmental financial and materiel management system (Activity 4.1.4.4 – Record Journal Entry). (Information on preparing the journal entry is available in the FIS Accounting Manual.) The process flow then continues to Manage Financial Close (Business Process 8.2).

All AUC-related expenditures need to be accumulated in the asset record and must continue to meet capitalization criteria—that is, the costs are valid and pertain to the AUC, and the total cost reflects the value of the resulting asset. ^{See footnote [25]} Another consideration is whether the AUC should continue to be a whole asset or should be split into components, as outlined in Sections 18 to 21 of Accounting Standard 3.1 – Treasury Board – Capital Assets. The analysis will focus on factors such as materiality, service life of the components, and reporting requirements.  

During the analysis, program management may decide to discontinue the construction of an asset—that is, the asset will be abandoned. This will result in the requirement to record either its disposal or its writeoff by expensing all of the capitalized cost during Process Asset Disposal (Subprocess 4.1.7).

When the analysis reveals that the asset is impaired, the required journal entry to writedown the asset is recorded in the departmental financial and materiel management system (Activity 4.1.4.4 – Record Journal Entry). (Information on preparing the journal entry is available in the FIS Accounting Manual.) The process flow then continues to Manage Financial Close (Business Process 8.2).

When the analysis reveals that the construction of the asset is complete or that the asset is in service, the change-in-status information is summarized (Activity 4.1.4.3 – Summarize Required Changes to Asset Record) and the asset record is updated during Create or Update Asset Record (Subprocess 4.1.1). The corresponding journal entry information is recorded in the departmental financial and materiel management system (Activity 4.1.4.4 – Record Journal Entry). (Information on preparing the journal entry is available in the FIS Accounting Manual.) The process flow then continues to Manage Financial Close (Business Process 8.2).

5.3.3.2 Roles and Responsibilities

Although corporate finance is accountable for the activities of this subprocess, it relies on the responsibility centre manager to provide accurate information to conduct the analysis. Either financial services or materiel services may be responsible for conducting the analysis on behalf of corporate finance. Financial services is responsible and accountable for recording the required journal entries.

Table 4 provides an overview of roles and responsibilities, using the Responsible, Accountable, Consulted and Informed (RACI) approach. These roles and responsibilities are further described in Appendix D.

Table 4. Conduct Periodic Analysis of Assets Under Construction (Subprocess 4.1.4) – RACI

Activity	Related Data	Responsible	Accountable	Consulted	Informed	Authoritative Source
Legend AUC: asset under construction CF: corporate finance DFMS: departmental financial and materiel management system FIN: financial services MS: materiel services N/A: not applicable RCM: responsibility centre manager
4.1.4.1 Compile AUC Listing	All costs (including additions  and “in service” costs) Asset class Asset identification number (as required) AUC record number (as required) Financial coding Project code Project data (e.g., time sheets, project completion estimate and project update) Responsibility centre	FIN, MS	CF	RCM	N/A	DFMS
4.1.4.2 Analyze AUC	All costs (including additions and “in service” costs) Asset class Asset identification number (as required) AUC record number (as required) Fair market value Financial coding Project code Project data (e.g., time sheets, project completion estimate and project update) Responsibility centre	FIN, MS, RCM	CF	N/A	N/A	DFMS
4.1.4.3 Summarize Required Changes to Asset Record	All costs (including additions and “in service” costs) Asset identification number (as required) AUC record number (as required) “In service” and “out-of-service” date Project data (e.g., time sheets, project completion estimate and project update) Responsibility centre	FIN, MS, RCM	CF	MS, RCM	MS	DFMS
4.1.4.4 Record Journal Entry	All costs (including additions and “in service” costs) Financial coding	FIN	FIN	MS, RCM	CF	DFMS

5.3.4 Conduct Periodic Physical Asset Count (Subprocess 4.1.5)

A physical asset count is conducted periodically to confirm the existence of assets and to ensure that the asset records in the departmental financial and materiel management system are accurate. A periodic physical asset count supports the deputy head's responsibility for ensuring that the organization conducts an ongoing and systematic assessment of the physical condition, functionality, use and financial performance of the organization's assets. ^{See footnote [26]}

Figure 7 depicts the Level 3 subprocess flow for Conduct Periodic Physical Asset Count.

5.3.4.1 Activities

Using the asset records in the departmental financial and materiel management system, materiel services compiles a listing of assets subject to review and grouped, for example, by class, category or responsibility centre (Activity 4.1.5.1 – Compile Asset Listing). In accordance with the asset count instructions, materiel services, in consultation with the responsibility centre manager, conducts the count by physically verifying the existence and the location of the assets (Activity 4.1.5.2 – Conduct Asset Count). The responsibility centre manager (the asset custodian) should not be responsible for confirming the existence of assets. Appendix E provides an outline of a model asset count instructions document.

Materiel services then compares the results of the physical count with the asset listing in the departmental financial and materiel management system in order to reconcile the physical assets with their records and to identify any differences (Activity 4.1.5.3 – Compile Results). The asset count results also provide information to support Conduct Periodic Asset Assessment (Subprocess 4.1.6).

Materiel services validates whether any differences between the asset records in the departmental and materiel management system and the physical asset count are discrepancies requiring further action (Activity 5.1.5.4 – Validate Findings). When the analysis reveals, for example, a change of asset custodian or a change of asset location, the relevant asset information is summarized (Activity 4.1.5.5 – Summarize Required Changes to Asset Record) and the asset record is updated during Create or Update Asset Record (Subprocess 4.1.1). When the analysis indicates that an asset in the listing is no longer held by the organization, asset disposal information is prepared (Activity 4.1.5.6 – Prepare Disposal Information) and reviewed during Process Asset Disposal (Subprocess 4.1.7).

5.3.4.2 Roles and Responsibilities

Materiel services conducts the analysis but relies on the responsibility centre manager to provide accurate information. Materiel services communicates the results to corporate finance, the role accountable for the activities of this subprocess.

Table 5 provides an overview of roles and responsibilities, using the Responsible, Accountable, Consulted and Informed (RACI) approach. These roles and responsibilities are further described in Appendix D.

Table 5. Conduct Periodic Physical Asset Count (Subprocess 4.1.5) – RACI

Activity	Related Data	Responsible	Accountable	Consulted	Informed	Authoritative Source
Legend AUC: asset under construction CF: corporate finance DFMS: departmental financial and materiel management system MS: materiel services NATO: North Atlantic Treaty Organization N/A: not applicable RCM: responsibility centre manager
4.1.5.1 Compile Asset Listing	All costs (including additions and “in service” costs) Asset identification number Bar code (as required) Custodian Date of purchase Description (serial number and model) Location “In service” and “out-of-service” date Project data (e.g., time sheets, project completion estimate and project update) Responsibility centre Status (e.g., “in service,” “not in service” and “AUC complete”)	MS	CF	RCM	N/A	DFMS
4.1.5.2 Conduct Asset Count	Asset identification number Asset status (e.g., “in service,” “not in service” and “AUC complete”) Custodian Description Location Physical asset count plan	MS	CF	RCM	CF	DFMS
4.1.5.3 Compile Results	Asset count results (including condition)	MS	CF	RCM	CF	DFMS
4.1.5.4 Validate Findings	Analysis findings (including asset count discrepancies)	MS	CF	RCM	CF	DFMS
4.1.5.5 Summarize Required Changes to Asset Record	Acquisition date All costs (including additions and “in service” costs) Asset class Asset identification number Asset status (e.g., “in service,” “not in service” and “AUC complete”) Betterment reference number (if applicable) Custodial responsibility centre Description “In service” and “out-of-service” date Location NATO Stock Number (if available) Project data (e.g., project code, time sheets and projected “in service” date) Purchase data (e.g., invoice, supplier, warranty information, purchase order and contract) Quantity Serial and model number (if applicable)	MS	CF	RCM	CF	DFMS
4.1.5.6 Prepare Disposal Information	All costs (including additions and “in service” costs) Asset description Asset identification number Custodian responsibility centre Net book value Purchase date Reason for disposal	MS	CF	RCM	CF	DFMS

5.3.5 Conduct Periodic Asset Assessment (Subprocess 4.1.6)

An asset assessment is a strategic or an operational review of part or all of the organization's asset base. It measures the extent to which the asset base continues to meets the organization's needs and validates the reasonableness of the value recorded in the departmental financial and materiel management system. This subprocess supports the deputy head's responsibility for ensuring that the organization conducts an ongoing and systematic assessment of the physical condition, functionality, use and financial performance of its assets. ^{See footnote [27]} The assessment may be conducted periodically or for a specific event—for example, the review of a departmental program.

The assessment results provide important input to Manage Planning and Budgeting (Business Process 1.1), which identifies and prioritizes capital asset life-cycle requirements and the related budget. The frequency of the periodic asset assessment may be aligned with departmental investment planning to ensure that asset life-cycle planning is appropriately integrated with the overall departmental planning cycle. Figure 8 depicts the Level 3 subprocess flow for Conduct Periodic Asset Assessment.

5.3.5.1 Activities

Using the asset records in the departmental financial and materiel management system, materiel services or corporate finance compiles a listing of assets subject to review and grouped, for example, by class, category or responsibility centre (Activity 4.1.6.1 – Compile Asset Listing). Assisted by corporate finance and in consultation with the responsibility centre managers, materiel services conducts the assessment to ensure that the asset base continues to support organizational priorities (Activity 4.1.6.2 – Conduct Asset Assessment). The assessment should also consider the full life-cycle costs and the benefits of the assets in meeting organizational program needs. ^{See footnote [28]}

The following questions may be considered when conducting the assessment:

• Have any changes to departmental objectives or programs had an impact on the usability of the asset?
• Is the asset obsolete?
• Is the asset damaged?
• Can the asset be modified or partially replaced to improve its functionality?
• Is the asset a movable heritage asset?

The assessment findings are an important input to the departmental investment plan produced during Manage Planning and Budgeting (Business Process 1.1). Consequently, the responsibility centre manager, materiel services and corporate finance must validate the findings to determine whether any further action is required (Activity4.1.6.3 – Validate Findings). When the assessment indicates that changes to the asset record are required, the relevant information is summarized (Activity 4.1.6.4 – Summarize Required Changes to Asset Record) and the asset record is updated during Create or Update Asset Record (Subprocess 4.1.1).

When the assessment reveals that an asset is impaired (that is, its future economic benefit has been permanently reduced relative to its value listed in the asset record), the impairment information is summarized (Activity 4.1.6.5 – Summarize Impairment Information). (Sections 14 to 17 of the Accounting Standard 3.1 – Treasury Board – Capital Assets provide further information on the valuation of capital assets.) The impairment information is used to produce the journal entry required to record the decrease in the asset’s book value to current net realizable value in the general ledger. (The FIS Accounting Manual provides further information on preparing the required journal entry.) The journal entry is recorded (Activity 4.1.6.6 – Record Journal Entry), to update the general ledger. The process flow then continues to Manage Financial Close (Business Process 8.2).

When, because of changes in strategic planning, management determines that an asset or a group of assets will no longer be used, asset disposal information is prepared (Activity 4.1.6.7 – Prepare Disposal Information) and reviewed during Process Asset Disposal (Subprocess 4.1.7).

5.3.5.2 Roles and Responsibilities

Financial services is responsible and accountable for recording the required journal entries. Corporate finance is accountable for all other activities within this subprocess. In certain cases, corporate finance and materiel services, in consultation with the responsibility manager, may be jointly responsible for conducting the asset assessment.

Table 6 provides an overview of roles and responsibilities, using the Responsible, Accountable, Consulted and Informed (RACI) approach. These roles and responsibilities are further described in Appendix D.

Table 6. Conduct Periodic Asset Assessment (Subprocess 4.1.6) – RACI

Activity	Related Data	Responsible	Accountable	Consulted	Informed	Authoritative Source
Legend CF: corporate finance DFMS: departmental financial and materiel management system FIN: financial services MS: materiel services N/A: not applicable RCM: responsibility centre manager
4.1.6.1 Compile Asset Listing	All costs (including additions and “in service” costs) Asset identification number Bar code (as required) Custodian Description (e.g., serial number and model) Financial coding Location “In service” and “out-of-service” date Performance measurement indicator data Project data (e.g., time sheets, project completion estimate and project update) Status (e.g., “in service,” “not in service” and “AUC complete”)	CF, MS	CF	RCM	N/A	DFMS
4.1.6.2 Conduct Asset Assessment	All costs (including additions and “in service” costs) Asset identification number Bar code (as required) Custodian Description (e.g., serial number and model) Financial coding “In service” and “out-of-service” date Investment plan Location Performance measurement indicator data Project data (e.g., time sheets, project completion estimate and project update) Status (e.g., “in service,” “not in service” and “AUC complete”)	CF, MS	CF	RCM	N/A	DFMS
4.1.6.3 Validate Findings	Analysis of findings	CF, MS	CF	RCM	N/A	DFMS
4.1.6.4 Summarize Required Changes to Asset Record	Acquisition date All costs (including additions and “in service” costs) Amortization category Asset class Asset identification number Asset status Betterment reference number (if applicable) Custodial responsibility centre Description Estimated useful life or capacity “In service” and “out-of-service” date Location NATO Stock Number (if available) Project data (e.g., project code, time sheets and projected “in service” date) Purchase data (e.g., invoice, supplier, warranty information, purchase order and  contract) Quantity Serial and model number (if applicable)	CF, MS	CF	N/A	N/A	DFMS
4.1.6.5 Summarize Impairment Information	Accumulated amortization All costs (including additions and “in service” costs) Asset class Current net realizable value Financial coding (e.g., responsibility centre) “In service” and “out-of-service” date Net book value Performance measurement indicator data Salvage value Service life (current and revised if applicable)	CF, MS	CF	N/A	N/A	DFMS
4.1.6.6 Record Journal Entry	Accumulated amortization All costs (including additions and “in service” costs) Current net realizable value Financial coding	FIN	FIN	MS, RCM	CF	DFMS
4.1.6.7 Prepare Disposal Information	Accumulated amortization All costs (including additions and “in service” costs) Asset identification number/ description Custodian responsibility centre Net book value Performance measurement indicator data Purchase date Reason for disposal	CF, MS	CF	RCM	CF, RCM	DFMS

This subprocess group describes the activities to be followed when disposing of an asset. The results of a periodic analysis of assets under construction, a periodic physical asset count, a periodic asset assessment or other circumstance—for example, an asset is found to be damaged; an asset has been identified as missing; or an asset disposal is required for security reasons—can lead to a notification for disposal of an asset. The disposal of the asset ends the Manage Other Capital Assets business process.

5.4.1 Process Asset Disposal (Subprocess 4.1.7)

This subprocess involves activities to ensure that assets are formally removed from the department when authorized by the responsibility manager with the delegated authority. Materiel services is responsible for the physical disposal of an asset, and corporate services is responsible for recording the disposal for financial reporting purposes once the physical disposal of the asset is complete. Figure 9 depicts the Level 3 subprocess flow for Process Asset Disposal.

5.4.1.1 Activities

The asset's disposal is authorized by the responsibility centre manager with the delegated authority (Activity 4.1.7.1 – Obtain Authorization for Disposal). Departments must have a delegation instrument that clearly sets out departmental authorities and accountabilities for the disposal of surplus, movable materiel assets. ^{See footnote [29]} If a disposal results from the loss or the theft of a capital asset, the Directive on Losses of Money or Property should be consulted to ensure that the appropriate procedures are followed when reporting and recording the loss.

After the disposal is authorized, the asset's status is updated to “not in service” (Activity 4.1.7.2 – Change Asset Status to “Not In Service”) in order to terminate the amortization of the asset. 

Materiel services selects the disposal method that ensures best value to the Crown, in compliance with the Directive on Disposal of Surplus Materiel. ^{See footnote [30]} Disposal methods include selling to an external party, transferring to another government department, making a donation, recycling or destroying the asset. Under the directive, whenever practicable, departments must make surplus materiel assets available, whether gratuitously, at book value or at market value, to other federal departments, before disposing of them outside the federal domain. ^{See footnote [31]} The directive also outlines disposal methods for certain types of assets—for example, right of first refusal of all surplus personal computers must be given to the Industry Canada Computers for Schools Program. These various methods, which may require approval, lead to the physical removal of the asset from the department's premises (Activity 4.1.7.3 – Physically Dispose of Asset).

Once the asset has been physically disposed of, the information resulting from the disposal—for example, the disposal date and, in the case of a sale, the proceeds from the sale—is used to record the disposal in the departmental financial and materiel management system. This involves the following activities:

• Recording the asset disposal in the asset record in the sub-ledger (Activity 4.1.7.4 – Record Disposal in Asset Record); and
• Recording the journal entry to update the general ledger (Activity4.1.7.5 – Record Journal Entry), which could include recording a gain or a loss on the sale of the asset.

The process flow then continues to Manage Financial Close (Business Process 8.2).

When the asset sub-ledger and the general ledger are integrated in the departmental financial and materiel management system, these two steps are typically combined; recording the disposal in the sub-ledger automatically generates the corresponding journal entry.

The collection of proceeds from the sale of an asset to an external party outside the federal domain is managed through Manage Revenue, Receivables and Receipts (Business Process 2.1).

When assets are transferred to other government departments and the transfer involves an exchange of funds, the department's designated program analyst at the Treasury Board Secretariat should be contacted. The Secretariat will help the department to select the appropriate Expenditure Management System mechanism to access these funds. Materiel services should ensure that the historical information in that department's asset record is transferred with the physical asset, to ensure continuity of management by the new custodian.

The disposal of the asset ends the Manage Other Capital Assets business process.

5.4.1.2 Roles and Responsibilities

The responsibility centre manager is responsible and accountable for obtaining authorization for the disposal of an asset from the responsibility centre manager with the delegated authority. Materiel services is responsible for the physical disposal of the asset, and financial services is responsible for recording the disposal in the departmental financial and materiel management system.

Table 7 provides an overview of roles and responsibilities, using the Responsible, Accountable, Consulted and Informed (RACI) approach. These roles and responsibilities are further described in Appendix D.

Table 7. Process Asset Disposal (Subprocess 4.1.7) – RACI

Activity	Related Data	Responsible	Accountable	Consulted	Informed	Authoritative Source
Legend CF: corporate finance DFMS: departmental financial and materiel management system FIN: financial services MS: materiel services N/A: not applicable RCM: responsibility centre manager
4.1.7.1 Obtain Authorization for Disposal	All costs Asset description Asset identification number Custodian responsibility centre Net book value Purchase date Reason for disposal	RCM	RCM	CF, MS	CF, MS	DFMS
4.1.7.2 Change Asset Status to “Not In Service”	“Not in service” date	MS, RCM	RCM	N/A	N/A	DFMS
4.1.7.3 Physically Dispose of Asset (This activity is strictly a materiel management function and is therefore outside the scope of the Manage Other Capital Assets business process.)
4.1.7.4 Record Disposal in Asset Record	Accumulated amortization All costs (including additions and “in service” costs) Asset description Asset disposal method Asset identification number Asset status Disposal cost (if applicable) Disposal date Net book value Proceeds from sale (if applicable) Report of surplus number (if applicable) Transferee or receiver (if applicable)	CF, MS	CF	MS, RCM	MS, RCM	DFMS
4.1.7.5 Record Journal Entry	Accumulated amortization All costs (including additions and “in service” costs) Asset description Asset identification number Disposal cost (if applicable) Disposal date Net book value Proceeds from sale (if applicable)	FIN	FIN	MS, RCM	CF, MS, RCM	DFMS