Routers lent to subscribers: stock or fixed assets?
Whether routers and other equipment placed with subscribers belong in stock or on the fixed-asset register, and how each choice is recorded in Achekam.
By Achekam · · 4 min read · For Telecoms businesses in South Africa, Nigeria, Kenya
An internet provider's storeroom holds boxes of routers, ONTs, wireless antennas, mesh units and voice handsets. Some will be sold outright to subscribers who want to own their kit. Others will be installed in subscribers' homes and offices, remain the provider's property, and come back when the contract ends. On the balance sheet, those are two different kinds of thing, and treating them the same distorts both your margins and your assets.
The question every provider has to answer, ideally before the first container of routers arrives, is: which of our equipment is stock, and which is a fixed asset? This article sets out how to decide, and how each kind is recorded in Achekam.
Sold, rented or lent: the question that decides it
What decides the treatment is what happens to the device, not what it is.
- Sold. The subscriber pays for the router and owns it. Until it is sold, it is stock held for sale. When it is sold, its cost becomes cost of sales.
- Lent or rented. The router stays yours, sits at the subscriber's premises, and comes back at the end of the contract. You use it to deliver your service over several years. That is property, plant and equipment: a fixed asset, depreciated over its useful life.
The IFRS Foundation's summary of IAS 16 Property, Plant and Equipment sets out the principles for recognising equipment like this, measuring its carrying amount and working out depreciation. Your accountant will apply them to your contracts.
Many providers have both kinds in the same storeroom. The same router model can be stock when it is sold to one subscriber and an asset when it is lent to another. Decide at the point it leaves the storeroom, and record it accordingly.
Equipment held for sale as stock items
Equipment you sell belongs in your product list. The Item Master in the Accounting menu lists and creates products on the server with SKU, name, category, selling and cost price, opening quantity and VAT treatment; it needs the Point of Sale, Warehousing or Wholesale add-on.
With the Warehousing add-on you keep stock locations, such as a main storeroom, a branch and each installer's van, with the quantity on hand at each. A stock count sets a location's quantity to what was counted and records the difference as an adjustment.
Two limits to know at the time of writing:
- How a sale reaches the ledger. A till sale takes the sold quantity off stock in the same step and posts cost of sales against inventory at the product's cost price. An invoice raised in receivables does not: invoice lines are typed in, so invoices do not move stock or post cost of sales. If you sell routers by invoice, your accountant will need a cost-of-sales journal for them.
- Adjustments stay off the ledger. Stock counts, wastage, transfers and opening quantities do not post to the general ledger; only till sales and till returns move the inventory account. Count differences need a journal agreed with your accountant.
For equipment carried on installers' vans, see routers and devices held on installers' vans.
Equipment that stays yours, on the fixed-asset register
Equipment you lend belongs on the fixed-asset register. The register lets a business add assets at cost, depreciate them monthly by straight line or reducing balance with a journal each month, and dispose of them with the profit or loss posted.
Registering every router as its own asset is the most precise approach, with each one's serial number and subscriber kept alongside it so you can trace any device. Some providers register equipment in batches instead, such as one entry per delivery of a model, with a separate list of serial numbers and where each is installed. Agree the level of detail with your accountant; what matters is that you can find any device and that the register's total agrees with the equipment account in the ledger.
Depreciation while it sits at the subscriber's premises
A lent router starts earning its keep when it is installed, and depreciation reflects that use. Choose a useful life that matches how long your routers actually stay in service, including refurbishment and re-issue, not the length of a typical contract. Straight line suits equipment that wears evenly; reducing balance suits technology that falls in value fast.
The register posts a depreciation journal every month. Run it before closing the month, because a journal dated in a closed month is refused. Tax wear-and-tear is not worked out by the register; your accountant calculates it separately under your country's rules.
Equipment that comes back, or is written off
When a lent router comes back, test it. If it is fit to lend again, it stays on the register and goes back on the shelf, ready for the next subscriber, with its depreciation continuing. If it is beyond repair, dispose of it in the register so the remaining book value is posted as a loss.
When a router does not come back at all, it is also a disposal: an asset you no longer have. Charge the subscriber under your terms, using any deposit you hold, as described in router deposits and equipment that is not returned, and dispose of the asset so the register matches reality. For another example of depreciating equipment that lives on the road, read depreciating a fleet.
A decision to make once
Write a short equipment policy with your accountant: which models you sell, which you lend, the useful life for lent equipment, and whether you register one by one or by batch. Then sort your current storeroom into the two kinds, and record each new delivery the right way from the day it arrives.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
