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What Exactly is a Ghost Asset?

by Brett Backues on August 1, 2016
What Exactly is a Ghost Asset?
 
Your business may appear better off than it actually is, thanks to these things called “ghost assets”, but what are they, exactly? If you’re thinking that it sounds spooky, you’d be right - this type of accounting error can end up costing your company a lot, especially in terms of your financial power and reputation. To put it simply, a ghost asset is one that is logged on a company’s fixed asset listing (FAL), but cannot be physically accounted for or utilized. These unusable assets can artificially inflate a business’s worth, showing up as numbers on a page, but are not able to help generate real revenue. So, how do ghost assets occur?
 
Companies that do not invest in thorough asset management are most at risk for getting caught with ghost assets. If you do not take the time and energy to take physical inventory of your resources, as well as account for depreciation, you may find that things fall through the cracks. These discrepancies are typically due to things like the sale, loss, decommissioning, or consumption of your company’s equipment and other goods. And while these things are expected in nearly every line of business, they can be overlooked or misrepresented in asset accounting. This is how a ghost asset is formed.
 
You can avoid the potentially-dangerous hassle of ghost assets by working with a qualified CPA firm, who can help you perform regular asset appraisals and inventory management. Especially as your venture grows, it’s a wise investment to lock down your asset handling strategies, so you can stay solvent and ahead of your market competition. 
 
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