Reading: Lesson 1 - A company accountant's role in managing plant assets
Since these assets are so closely related to profits, good management is required. In
accounting terms, a good return on operating assets is crucial to the success of the
corporation. Many corporations have a staff of accountants whose primary task is to
manage operating assets. This task involves making decisions concerning the purchase,
use, and disposal of said assets. Once an asset has been acquired, accountants are responsible for determining the original value of the asset, the period over which it will
extend benefits to the company, and its current market value while owned by the
entity. The accountant must ultimately determine when and how to dispose of such an
asset. The decision can range from trading the asset for a new asset to selling the asset
to a salvage dealer.
Recently, The Williams Companies, Inc. had over USD 10 billion dollars in property,
plant, and equipment. In addition, the company also had approximately USD 530
million in commitments for construction and acquisition of property, plant, and
equipment. Managing a portfolio of assets of this magnitude takes both accounting
knowledge and analytical skills. Successful management of these assets can be
financially rewarding to both the company and the accountant. On a classified balance sheet, the asset section contains: (1) current assets; (2)
property, plant, and equipment; and (3) other categories such as intangible assets and
long-term investments. Previous chapters discussed current assets. This chapter begins
a discussion of property, plant, and equipment that is concluded in Chapter 11.
Property, plant, and equipment are often called plant and equipment or simply
plant assets. Plant assets are long-lived assets because they are expected to last for
more than one year. Long-lived assets consist of tangible assets and intangible assets.
Tangible assets have physical characteristics that we can see and touch; they include
plant assets such as buildings and furniture, and natural resources such as gas and oil.
Intangible assets have no physical characteristics that we can see and touch but
represent exclusive privileges and rights to their owners.