Glossary of Terms

This Glossary of Terms, provided for your reference, consists of accounting language used across our website and commonly used in topics surrounding fixed asset management.

Depreciation

Depreciation is the allocation of an asset’s purchase cost, across its useful life, relating to normal wear and tear. The term is most often used when referring to assets with a short, fixed service life. Depreciation causes expenses to be recognized and therefore lowers reported profits on a company’s income statement; the asset’s net value subsequently declines on the balance sheet. Depreciation has a direct impact on organizations’ financial statements and taxes.

Fixed Asset Register

A Fixed Asset Register is an accounting tool used to store and manage an organization’s list of fixed assets (e.g. computer and office equipment, land, buildings, etc.), which consists of items held for the purpose of production of goods or performing services, not used for the purpose of sale. Put simply, a Fixed Asset Register is a list of fixed assets.

Fixed Asset Management

Fixed Asset Management is an accounting process used to track fixed assets for the purpose of financial accounting (depreciation). Many companies also elect to track the whereabouts, quantity, condition and maintenance records relating to fixed assets.

Sarbanes-Oxley

The Sarbanes-Oxley Act of 2002, commonly referred to as SOX or Sarbox, is a United States federal law enacted in response to several major corporate accounting scandals. This legislation establishes enhanced standards for all U.S. public company boards, management and public accounting firms. The Act requires the Securities and Exchange Commission (SEC) to implement rulings on requirements to comply with the new law. In summary, SOX covers issues such as auditor independence, corporate governance, internal control assessment and increased financial disclosure.

Acronyms

ACRS: Accelerated Cost Recovery System

ACRS is a system of depreciation enacted by the Economic Recovery Tax Act of 1981. This depreciation method is based on recovery periods instead of useful life. These periods were predetermined by the Internal Revenue Service (IRS).

GAAP: Generally Accepted Accounting Principles

GAAP is a standard structure of guidelines for financial accounting, most often used in the U.S., that consists of rules which accountants are required to follow when recording transactions and preparing financial statements.

GASB: Governmental Accounting Standards Board

GASB is a private, non-governmental organization. Its task is to establish and improve standards of state and local governmental accounting and financial reporting and to educate the public, auditors and users of financial reports. GASB is the creator of GAAP.

MACRS: Modified Accelerated Cost Recovery System

MACRS is the new accelerated cost recovery system, which was created following the release of the Tax Reform Act of 1986. It allows for greater accelerated depreciation over longer time periods. Faster acceleration enables organizations to deduct greater amounts during the first few years of an asset's life.

MUOP: Multiple Units of Production

MUOP is a depreciation method whereby the depreciation calculation, taken over a certain period of time, is a direct reflection of the number of units that particular asset or group of assets has produced over the same period of time.

SOX: Sarbanes-Oxley

Please refer to the glossary section above for more information.