Capital Asset Planning

Capital assets are often a significant item on a company’s balance sheet. A new capital expenditure affects all of the company’s financial statements: the P&L, balance sheet, and cash flow statement. Capital acquisition planning often needs to be driven from other planned events, such as new headcount, increased production, company expansion or acquisition, or replacement of obsolete assets.

But capital asset planning should be relatively simple. The acquisition of new assets should either be modeled as a result of other planned events, or entered by budget managers based on their requirements. The rest should happen automatically:

• Depreciation should be calculated and the resulting expense should be folded into the P&L at the appropriate organizational level.
• If new debt is required to purchase assets, the debt schedule should be easily and automatically updated.
• Interest expense from this debt schedule should be integrated into the P&L.
• The balance sheet should be automatically updated for both the new fixed assets, the change in accumulated depreciation, and any changes in debt.
• And of course the cash flow statement should react automatically and seamlessly.

Spreadsheet-based planning is unable to handle these requirements. What’s needed is a purpose-built planning application with a centralized database and automated integration capabilities, plus driver-based modeling capabilities, a fully integrated set of financial statements, and flexible reporting and analysis tools. What’s needed is Adaptive Planning.

Adaptive Planning offers all of the functionality necessary for fast, easy, and fully integrated capital asset planning.

• Unlimited Custom Dimensions. Create as many dimensions as you need to plan capital assets, e.g., departments or cost centers, projects, and asset classes, such as Machinery & Equipment, Furniture & Fixtures, Leasehold Improvements, etc.
• Sheet Templates. Use pre-configured sheet-building templates to speed up creation of capital sheets and related formulas.
• Multiple Line Item Detail. Plan new assets in as much detail as required, using unlimited rows, each with its own notes and descriptions, providing detailed support behind numbers.
• Spread Tables. Use spread tables to spread capital spending values into depreciation expense over time. Model different depreciation methods (straight line, declining balance, sum-of-the-years’ digits, etc.) Tie different depreciation methods and asset lives to dimensions such as asset class. These depreciation spreads can be easily folded into expense, balance sheet, and cash flow formulas.
• Driver-Based Planning. Use drivers or metrics such as headcount, production units, etc. to plan new capital expenditures. Use new capital items to drive new debt. Drive interest expense from debt and depreciation from capital. Model impact of gain or loss on disposal or sale of assets.
• Integrated Financial Statements. Link elements to create a complete set of dynamic financial statements, including Income Statement, Balance Sheet, and Cash Flow.