Most controllers will say the fixed asset reconciliation is fine: the FA subledger ties to the GL control account, depreciation posts via a monthly JE, the auditor signs off. What they mean is that the balances tie. What gets re-derived from source maybe once a year is the depreciation rollforward: opening net book value, additions, disposals, depreciation expense, closing net book value. That's where every asset movement during the year has to be defensible, and that's where the FA workpaper quietly grows stale.
The lifecycle of a fixed asset
Each stage triggers a different reconciliation step
Each stage transition is a reconciliation event. Acquisition needs PO-to-invoice-to-capitalization tie-out. CIP transfer needs project completion documentation and an in-service date. Depreciation needs a defensible useful life and method. Disposal needs symmetric removal of cost and accumulated depreciation. Miss any one of these and the NBV rollforward breaks.
The NBV rollforward in one table
| Component | Description | Cost basis | Accum depr | NBV |
|---|---|---|---|---|
| Opening (Jan 1) | Per prior year audited balance sheet | $48,200 | ($21,400) | $26,800 |
| + Additions | Capex placed in service this year | +$6,800 | n/a | +$6,800 |
| + CIP transfers | Projects completed, moved from CIP | +$2,400 | n/a | +$2,400 |
| − Disposals (cost) | Assets sold, retired, or scrapped | ($1,900) | +$1,650 | ($250) |
| − Depreciation expense | Current-year depreciation per schedule | n/a | ($4,200) | ($4,200) |
| − Impairment | Triggered by ASC 360 indicator review | n/a | ($180) | ($180) |
| Closing (Dec 31) | Should tie to GL FA control accounts | $55,500 | ($24,130) | $31,370 |
Illustrative figures in $K. If the rollforward regenerates from source, with the FA subledger pulled fresh, the CIP module queried, and the depreciation calculation re-run, every line is defensible. If it carries forward last year's closing and adjusts at the margin, errors compound until the auditor finds them at year-end.
Book vs tax depreciation, side by side
The difference between the two creates the temporary difference that drives the deferred tax balance for fixed assets, covered in detail in the tax reconciliation explainer. When the asset populations drift, with an asset added to FA but not to the tax workbook, or disposed in book but still depreciating in tax, the deferred tax balance becomes unsupportable.
Where fixed asset reconciliation breaks
CIP transfers on the wrong date. A project is substantially complete on March 15 but doesn't transfer to in-service until June. Three months of depreciation are missed and then booked as a cumulative catch-up. The auditor asks why the asset's useful life starts in June when install completed in March.
Disposals that hit cost but miss accumulated depreciation. Cost basis comes off the FA register. The accumulated depreciation reversal gets skipped. Accumulated depreciation overstates by the historical depreciation on the disposed asset, and NBV breaks by the disposal amount.
Book vs tax drift. Asset added to FA but never to the tax workbook. Or disposed in book but still depreciating in tax. The book-tax difference becomes a stale M-1 item on the provision that nobody can reconcile until year-end.
Ghost assets. Laptops, monitors, small equipment capitalized at purchase but never physically tracked. Sitting on the FA register five years after they left the building. Physical inventory at audit catches them as a writedown.
What good looks like
A clean fixed asset reconciliation has the NBV rollforward regenerated from source each close, not carried forward from last year's spreadsheet. CIP transfers happen on the in-service date, validated against project completion documentation. Disposals trigger both cost and accumulated depreciation reversals at the same time, with gain/loss calculated automatically. Book and tax depreciation tie to a single shared asset population. Physical asset verification runs on a rolling cadence, not as a year-end fire drill.
See how Cadel handles fixed asset and depreciation reconciliation, or get in touch to walk through your current NBV rollforward.