SPRING 2014
FMI
*
IGF JOURNAL
7
OVERVIEW AND
INTRODUCTION
It is 10am; do you know where your
assets are? Do you have attractive
assets that tend to ‘grow-legs’? Do
you have distinct capital and operating
budgets and do you have even more
distinct activities to acquire, manage
and dispose of your assets? How about
the accounting; are you comfortable
with why and how your assets are
depreciated? Would you like to make
improvements to how you manage
assets but the whole thing seems too big
and involves too many people?
You are not alone in these challenges.
In 2011, the International Atomic
Energy Agency (IAEA or the Agency)
adopted International Public Sector
Accounting Standards (IPSAS). Like
similar Canadian or international
standards, IPSAS 17: Property, Plant and
Equipment (PP+E), requires adherents
to depreciate the cost of capital assets
over their economic or useful life. Prior
to adopting IPSAS, the IAEA used a
modified cash basis of accounting. With
IPSAS came capitalization and other
accounting challenges. To manage this
change, the IAEA formed an IPSAS
implementation team that included
the author as the PP+E specialist. The
team developed and implemented the
IAEA PP+E Asset Lifecycle Framework
(PP+E Framework).
This frameworkconsiders theactivities,
actors and information flows during the
life of an asset. For-profit companies
constantly weigh the merits of holding
versus liquidating assets to maximize
shareholder value. In the public sector,
this cash-flow discipline is not always
present. As well, the organization may
disperse the functions of the lifecycle
(e.g. acquisition, use, and disposal) across
multiple departments. Although focused
on tangible assets, the framework can
be adapted to intangible assets such as
software or computer systems.
First, some context about the IAEA;
it has two broad functions that both
employ assets:
1) Promoting the safe use of atomic
energy, and
2) Verifying that member states
are compliant with their treaty
obligations.
Nuclear facilities across the globe are
the focus of the second function. The
Agency inspectors install cameras, seals
and other measuring equipment (all
potential assets) inmember state facilities.
Both of the IAEA’s functions employ
other assets such as laboratories and
communication equipment The Agency
defines an asset as an individual item or
pool of items having an economic life
greater than one year and an individual
value more than 3,000EUR (note 30 of
the Agency’s 2012 financial statements).
OVERVIEW PP+E LIFECYCLE
MODEL
The lifecycle model follows an asset
from its initial need to its eventual
disposal. The model touches nearly
all aspects of finance and four key
functions of an organization’s Enterprise
Resource Planning (ERP) system. The
descriptions within the brackets are
typical ERP activities that support the
asset lifecycle:
1.
Budgeting:
the planning, monitor-
ing and resource allocation functions.
The Internal Atomic Energy Agency’s Property, Plant
and Equipment (PP+E) Lifecycle Framework
(With Sidebar Articles on:
Attractive Assets
; and
The Asset Verification Framework
)
Frank Potter, CMA, MBA
Figure 1: 2012 & 2011 PP+E (IAEA’s 2012 financial statements, p. 10)
Table 6: Comparative PP&E Analysis
Property, plant and equipment (expressed in millions of euros)
Class
2012
2011
Change
Buildings
16.3
16.2
0.1
Communication and IT equipment
8.5
6.6
1.9
Inspection equipment
10.6
9.5
1.1
Laboratory equipment
7.5
6.7
0.8
Assets under construction
27.8
5.1
22.7
Other equipment
2.8
3.1
(0.3)
73.5
47.2
26.3
