Fixed Asset Roll Forward: Definition & Example

Instructor: Douglas Stockbridge

DJ Stockbridge is currently pursuing a Masters degree in Accounting.

In this lesson, you will learn how accountants use fixed asset roll forwards to more accurately account for plant, property and equipment changes during the accounting period.

Construction Equipment

Imagine you run a large construction company in the rural part of a state. Your grandfather started the company 100 years ago, and it has stayed family-owned since then. Your company focuses on site work preparation. This requires a lot of equipment. It is a lot more capital-intensive than worker-intensive like you'd see with a construction company that focuses on buildings. Your firm has grown quite substantially recently, and you were forced to take out a bank loan to finance new equipment purchases. The bank loan is secured by the equipment, so you want to make sure the accountants are recording total equipment correctly. In fact, the bank asks you how you calculate equipment each year.

In this lesson, we will first define fixed asset roll forwards. We will then walk through an example of the calculation using your site-prep construction company. Let's dig into the material!

Fixed Asset Roll Forwards

A fixed asset roll forward is a schedule showing the beginning balance, additions, disposals, transfers, and ending balance for a particular account. The accounts can vary among fixed assets. They can be buildings, land, or equipment. Usually, the accountant creates a schedule for both the gross amount of the account and the corresponding accumulated depreciation. The purpose of this schedule is to make sure everything is being recorded as it should.

Example - Let's See the Numbers

Let's walk through an example to ''hammer'' the point in. Let's assume the following facts about your construction company. First, we will focus just on the equipment account. The beginning balance for gross equipment was $100M. $50M of additional equipment was bought, $25M was sold and $0 was transferred. Our fixed asset roll forward for gross equipment is:

Beginning Balance + Additions - Disposals +/- Transfers = Ending Balance

$100M + $50M - $ 25M +/- 0 = $125M

The accountant will then need to create a separate accumulated depreciation schedule for equipment. Let's assume the beginning balance of accumulated depreciation is $50M and the equipment carried forward to this year has a remaining useful life of 10 years and will be straight line depreciated. In fact, we will assume all equipment (new or old) has a useful life of 10 years and will be straight line depreciated. For any equipment bought or sold during the year, we will assume the transaction happened in the middle of the year. This is called the half-year depreciation convention. The fixed asset roll forward is:

Beginning Balance ($50M)

+ Depreciation Exp for Equipment Carry Forwarded to this Year ($10M)

+ Depreciation Exp for New Equipment ($2.5M)

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