An asset tagging policy defines how an organisation identifies, tags, records, verifies and controls its fixed assets throughout their lifecycle. It establishes consistent rules for deciding which assets should be tagged, what type of tag should be used, where the tag should be placed and how changes such as transfers, disposals and missing assets should be recorded.
A good policy should not be limited to the physical label attached to an asset. It should connect the physical asset, unique identification number and Fixed Asset Register (FAR) so that the organisation has a consistent method for identifying assets across locations and departments.
The exact policy will vary depending on the organisation’s asset base, accounting policies, operating environment and internal control requirements. The following framework covers the main areas that finance controllers, CFOs and internal auditors should consider while preparing or reviewing an asset tagging policy.
1. Define the Scope of the Asset Tagging Policy
The first section should clearly state which assets fall within the policy.
An organisation may decide that all capitalised movable assets will be tagged, or it may define tagging requirements based on asset category, value, location or operational importance.
The policy should address:
- assets above the organisation’s capitalisation threshold;
- movable Property, Plant and Equipment;
- IT equipment;
- office equipment and furniture;
- plant and machinery;
- laboratory or specialised equipment;
- assets located at branches, warehouses, plants or project sites; and
- assets held at employee or third-party locations, where applicable.
The policy should also identify assets that may not require a conventional physical tag.
Examples can include land, buildings, very small components, assets operating at extreme temperatures, inaccessible equipment or items where attaching a tag may affect operation or safety.
The capitalisation threshold should normally come from the organisation’s accounting policy. The tagging policy should therefore complement the accounting policy rather than create a separate accounting threshold.
For assets below the capitalisation threshold that management still wants to control, the organisation may maintain a separate trackable-assets or inventory register.
2. Specify Tag Types and Where They Should Be Used
One tag type may not be suitable for every asset.
The policy should define the approved tagging methods and the circumstances in which each method should be used.
Polyester asset tags
Polyester labels are commonly suitable for office furniture, computers, printers, electrical equipment and other assets kept in relatively controlled indoor environments.
They can generally be printed on site, which makes them useful when Asset IDs need to be generated or confirmed during the tagging exercise.
Stainless steel asset tags
For plant and machinery or assets exposed to heat, moisture, chemicals, outdoor conditions or frequent cleaning, a more durable tag may be required.
Laser-marked 316L stainless steel tags can be considered for harsh operating environments.
Where customised stainless steel tags are required, they generally need to be manufactured in advance rather than printed during fieldwork. For TagMyAssets projects, planning normally provides approximately 10–12 working days for manufacturing before deployment.
RFID tags
RFID can be considered where faster identification or technology-enabled verification is operationally useful.
However, RFID should not automatically be selected for every asset. The asset surface, surrounding material, reading environment, expected verification process and cost should all be considered.
For example, RFID tags intended for metal surfaces may require a different construction from RFID labels used on non-metal surfaces.
The policy should therefore describe where each tag type is appropriate, instead of prescribing a single tag technology for the entire asset base.
For more detail on the practical tagging process, see Asset Tagging in India.
3. Establish Clear Tagging Rules
Once tag types are defined, the policy should explain how they are to be applied.
One unique ID for each identifiable asset
Each separately identifiable asset should normally have a unique Asset ID.
That Asset ID should be linked with the corresponding record in the FAR.
The same identifier should be used consistently during:
- physical verification;
- asset transfers;
- maintenance or servicing;
- disposal;
- reconciliation; and
- future verification cycles.
Duplicate Asset IDs should not be issued.
Tag placement should be consistent
The tag should be placed where it is:
- reasonably visible;
- accessible during future verification;
- unlikely to interfere with operation;
- protected from unnecessary damage; and
- applied consistently for similar asset categories.
For example, if a standard tag position is defined for desktop computers, air conditioners or office chairs, the same placement rule should normally be followed across locations.
Tags should not be placed over serial numbers, safety instructions, ventilation areas, controls or other important manufacturer information.
Working-height responsibility
The policy should also define responsibility for assets installed at height.
For TagMyAssets field execution, tagging can generally be carried out by the tagging team for assets accessible up to approximately 10 feet, subject to site safety conditions.
For assets located above that level, the organisation’s maintenance or authorised site team should provide appropriate access and support.
No tagging activity should override the site’s safety requirements.
4. Define Physical Verification Frequency by Asset Class
An asset tagging policy should also state how frequently tagged assets are expected to be physically verified.
There is no need for every asset category to have exactly the same verification cycle.
Management may determine the frequency after considering:
- asset mobility;
- value;
- number of locations;
- risk of loss or movement;
- history of discrepancies;
- operating environment; and
- internal control requirements.
For example, laptops and other mobile IT assets may require more frequent verification than large machinery permanently installed at a plant.
For companies to which CARO 2020 applies, Paragraph 3(i)(b) requires the auditor to report on whether Property, Plant and Equipment have been physically verified by management at reasonable intervals and whether material discrepancies noticed during verification have been properly dealt with in the books.
CARO should therefore not be described as prescribing an annual physical verification mandate for every company or every asset. The appropriate verification interval remains a management consideration based on the organisation’s circumstances.
For a detailed discussion of this point, see CARO 2020 Fixed Asset Verification Requirements.
Organisations designing a verification programme can also refer to Physical Verification of Assets.
5. Assign Departmental Responsibility
Asset control becomes difficult when responsibility sits entirely with the finance department.
The policy should clearly allocate responsibility between the relevant functions.
Asset custodian or user
The custodian should be responsible for the physical possession and appropriate use of the asset and should report transfers, damage, loss or changes in location through the defined process.
Finance team
Finance should maintain the FAR, control Asset IDs, record capitalisation and disposal information, reconcile verification results and ensure approved changes are reflected in the records.
IT team
For laptops, desktops, servers, network equipment and other IT assets, the IT team may maintain additional information such as serial number, hostname, user allocation and technical configuration.
The asset tagging policy should explain how the IT asset register and financial FAR will remain aligned where separate systems are maintained.
Administration, plant or maintenance teams
These teams may be responsible for operational assets, location confirmation, access to technical areas and support for assets that cannot safely be reached by the verification team.
Clear ownership helps prevent an asset discrepancy from remaining unresolved merely because no department knows who is responsible for investigating it.
6. Set Rules for Transfers, Disposals and Re-Tagging
An asset tag should remain linked to the same asset throughout its life.
When an asset moves from one location, department or custodian to another, its existing Asset ID should normally remain unchanged.
The transfer record should capture relevant information such as:
- previous location;
- new location;
- previous custodian;
- new custodian;
- transfer date; and
- approval reference, where applicable.
Similarly, disposal of an asset should be updated in the FAR through the organisation’s authorised disposal process.
A disposed Asset ID should not normally be reassigned to a newly purchased asset.
When should an asset be re-tagged?
Re-tagging may be required when:
- the original tag is damaged;
- the tag has become unreadable;
- the tag has detached;
- the organisation has migrated to a new tagging standard; or
- an incorrect tag was previously attached.
Where possible, replacement of a damaged tag should retain the same Asset ID rather than creating a new asset record.
The policy should also require an audit trail for re-tagging so that the history of the asset remains traceable.
7. Define How Verification Discrepancies Will Be Treated
Physical verification frequently identifies differences between the FAR and assets available on the ground.
The policy should define standard discrepancy classifications so that different locations do not use different terminology for the same issue.
Four categories are:
Not Found
An asset appearing in the FAR but not physically located during verification.
A Not Found classification should normally trigger investigation rather than immediate deletion from the FAR.
The organisation may need to check previous locations, custodians, transfer records, repair records or disposal documentation.
Excess (found but unrecorded)
An asset physically found but not matched to an appropriate record in the FAR.
Possible reasons may include unrecorded capitalisation, incorrect asset descriptions, transferred assets, duplicate physical assets or items belonging to another entity or location.
The item should be investigated before creating a new FAR record.
Wrong Location
An asset is physically verified but is found at a different location from the location recorded in the FAR.
After appropriate confirmation, the asset’s master information can be updated through the approved transfer or correction process.
Condition issue
An asset is physically verified and matched to the FAR, but is damaged, not in use, obsolete or awaiting repair.
Recording condition during verification gives management the information needed to decide on repair, impairment review or disposal. The condition finding should be reported separately rather than mixed with existence or location differences.
The policy should specify who has authority to approve adjustments arising from physical verification and how supporting documentation should be retained.
8. Address Special Asset Categories
A useful asset tagging policy should also explain how non-standard categories will be treated.
Fully depreciated assets
An asset with a nil or nominal carrying amount that is still in use remains part of the asset base. It should stay in the FAR and remain tagged until it is disposed of through the authorised process.
Removing fully depreciated assets from tagging and verification can result in items becoming difficult to reconcile during later verification cycles.
Capital work-in-progress (CWIP)
Items under construction or installation are not yet capitalised assets. The policy should state when an Asset ID is issued, which is normally at capitalisation, and whether temporary identification is used for components received at site before that point.
Assets should be tagged and added to the FAR when they are transferred out of CWIP.
For more on this stage, see CWIP Verification and Capitalisation.
Leased and third-party assets
Assets held under lease, assets belonging to customers or vendors, and assets lent by group companies should be clearly distinguished from owned assets.
The policy should state whether such items receive a separate tag series, a different tag colour or a category flag in the register, so that verification does not report them as excess or count them as owned.
Components and embedded assets
Where significant parts of an asset are recorded separately under the organisation’s accounting policy, the tagging policy should state whether each component receives its own Asset ID or is recorded under the parent asset.
Equipment built into a structure or another machine may not be practical to tag directly. The policy should define an alternative identification point, such as a tag on the housing or panel.
See Component Capitalisation vs Physical Verification.
Land and buildings
Land is not physically tagged. Its existence is normally confirmed through title documents, records and site inspection.
Buildings may carry an identification plate where useful, but verification relies on documentation and inspection rather than a tag scan.
9. Asset Tagging Policy Adoption Checklist
Before adopting or revising the policy, confirm that it covers the following:
- Scope of assets to be tagged, linked to the capitalisation threshold in the accounting policy
- Assets excluded from physical tagging and how they will be identified instead
- Approved tag types and the asset categories each is used for
- Asset ID format and the rule that IDs are unique and never reissued
- Standard tag placement by asset category
- Responsibility for tagging assets installed at height or in restricted areas
- Physical verification frequency by asset class
- Roles of custodians, finance, IT and operations teams
- Procedure for transfers, disposals and re-tagging, with an audit trail
- Standard discrepancy classifications and who approves adjustments
- Treatment of fully depreciated, CWIP, leased, component and land and building assets
- Review date and owner of the policy
10. Putting the Policy into Practice
Once the policy is approved, TagMyAssets carries out the tagging, physical verification and FAR reconciliation it describes, across locations in India.
The policy itself should be approved by the organisation based on its accounting policy, asset base, operating environment and internal control requirements.
If your organisation is planning to implement or review its asset tagging process, discuss your requirement.
