When implementing Xero, one of the most important steps is setting up your Fixed Asset Register (FAR) correctly. Whether you’re migrating from another accounting system or starting fresh, understanding how to manage your assets from take-on to ongoing depreciation ensures accurate financial reporting and smooth audits.
Take-Ons During Implementation
When migrating to Xero, you’ll need to bring in your existing fixed assets. This is known as the take-on process.
You can add fixed assets to Xero either one-by-one or via CSV upload. Before doing this, make sure you’ve created and defined your asset types (more on this below).
Each asset requires a few key inputs:
- Purchase date: when the asset was originally bought.
- Purchase price: the cost of the asset.
- Asset type: which determines the linked accounts and depreciation settings.
- Opening accumulated depreciation: total depreciation up to your Xero conversion date.
- Book value: the carrying amount at conversion.
These fields ensure your starting balances are correct and that future depreciation calculations are accurate.
Setting Up Asset Types
Before importing or creating assets, you’ll need to set up your Asset Types in Xero.
Navigate to Settings → Fixed Assets → Asset Types.
Asset types act as the link between your:
- Fixed asset account
- Accumulated depreciation account
- Depreciation expense account
They also define important defaults like:
- Depreciation method (e.g. straight-line or diminishing value).
- Effective life of the asset class.
Setting these up correctly, up front, saves time later and keeps your FAR consistent and compliant.
Managing the Fixed Asset Register Post-Implementation
Once your FAR is in place, you’ll continue to add and manage assets as your business grows.
Adding New Fixed Assets
There are several ways new assets can enter your FAR:
- Bills allocated to a fixed asset account (that belongs to an asset type) automatically create a draft fixed asset where you can then fill in missing information and register the asset.
- Spend money transactions (recorded directly from the bank reconciliation screen) allocated to a fixed asset account will also create a draft asset to be registered.
- Manual additions are also possible. In this case, be sure to include all key inputs (purchase date, price, type, accumulated depreciation, etc.).
💡 Tips:
- The depreciation start date should usually match the asset’s purchase date.
- Assign a unique asset name (for example, if you have two similar laptops) to easily distinguish between the two.
Running Depreciation
Running depreciation in Xero is simple.
Click the Run Depreciation button and choose your desired date range. It’s flexible and can be adjusted as needed.
A good sanity check after your initial import is to:
- Run depreciation for March (for example). Compare it against your February depreciation expense from your previous system.
If something doesn’t look right, don’t worry, Xero allows you to roll back and redo (rerun) depreciation easily. Simply click Run Depreciation, then select the Rollback Depreciation option.
💡 Tip: Refer to the SARS Wear and Tear allowances for guidance on the effective life/rate to use for depreciation, based on the type of asset you are registering.
Reconciling Fixed Assets to the Balance Sheet
Once your FAR is up and running, it’s crucial to ensure it aligns with your Balance Sheet.
Use the Fixed Asset Reconciliation (New) report to check for discrepancies.
This report highlights any differences between:
- What’s recorded in the FAR.
- What’s actually allocated to your balance sheet accounts.
Because the Fixed Asset Register doesn’t automatically enforce matching values, differences can arise, particularly in:
- Cost: if the bill value and FAR entry differ.
- Accumulated depreciation: differences between conversion balances and depreciation journals.
- Fixed Asset Type Assigned: The asset type selected on the bill/spend money differs from the asset type registered under the FAR.
- Assets not yet registered / in “draft” status: When the asset has been recorded on a bill/bank line, but is still sitting under “draft” on the FAR to be registered.
Regularly reconciling ensures your books stay accurate and makes year-end reporting much easier.
⚠️ Be aware: if the original bill or spend money is manually altered after the Fixed Asset has been established, a discrepancy will appear on the Fixed Asset Reconciliation (New) report. This is because the Balance Sheet will reflect the change, but the Fixed Asset Register will retain the initial setup information.
💡 Tip: Pull the fixed asset reconciliation as part of your usual month-end checks. This will also ensure the figures reported monthly are accurate.
Making Fixed Asset Management Simple
Setting up and managing fixed assets in Xero may seem technical, but once you understand the process, it’s straightforward, and the payoff in cleaner reporting is worth it.
At Creative CFO, our Systems Team helps businesses implement and maintain accurate fixed asset registers, ensuring a smooth handover from legacy systems and reliable data for decision-making. Need help setting up Xero? Let’s chat.
