Ghost Asset Elimination and Full FAR Cleansing for a Global Rubber Products Manufacturer — Multi-Site Indonesia Verification
JCSS Indonesia conducted a comprehensive multi-site fixed asset register verification and cleansing for a global rubber and polymer products manufacturer across three Indonesian factory locations — identifying ghost assets, flagging impairment indicators under PSAK 236, correcting insurance under-coverage, and delivering audit-grade evidence accepted by the parent group's international auditors.
The Challenge
For capital-intensive manufacturing operations, the fixed asset register (FAR) is one of the most consequential — and most commonly neglected — financial records. At the global rubber manufacturer's Indonesian factories, the FAR had not been subject to independent physical verification in over three years. The result: a register that no longer reflected physical reality.
| Challenge | Operational Reality | Business Risk |
|---|---|---|
| Unverified FAR for 3+ years | Asset register not reconciled to physical plant since 2021 | Material misstatement risk in balance sheet; external auditor unable to place reliance on asset balances |
| Ghost assets | Fully depreciated machinery and equipment physically removed or scrapped — but still active in ERP | Balance sheet overstated; ongoing depreciation charges distorting P&L |
| Multi-site coordination | Three factory locations required simultaneous verification to meet group audit timeline | Sequential verification would miss inter-site asset transfers occurring during count window |
| Impairment indicators unassessed | Several production lines partially idled due to demand changes; no formal impairment review conducted | PSAK 236 (formerly PSAK 48) requires impairment testing when indicators present — non-compliance risk |
| Insurance under-coverage | Insured asset values not updated since 2019; replacement costs have risen materially | Catastrophic underinsurance in the event of fire, flood, or natural disaster at factory |
Our Approach
- 1
Pre-Verification Scope Agreement
Aligned verification procedures with both the Indonesian KAP and the parent group's international auditors; agreed evidence standards, count sheet format, photographic documentation requirements, and reporting template for group audit file.
- 2
Simultaneous Multi-Site Deployment
Deployed independent JCSS Indonesia verification teams to all three factory locations on the same day; established a strict movement freeze (no inter-site transfers during count window); completed full physical count within a 3-day window.
- 3
Asset-by-Asset Physical Reconciliation
Compared each physically verified asset to the FAR and GL: confirmed existence, recorded physical location, captured asset condition (serviceable / needs maintenance / impaired / to be disposed), and cross-referenced asset plate numbers to ERP asset codes.
- 4
Ghost Asset and Addition Identification
Systematically identified: assets on FAR not physically found (ghost assets — flagged for write-off); assets physically present but not in FAR (unrecorded additions — flagged for capitalization); and assets in wrong cost center or location in ERP.
- 5
Impairment Assessment and Insurance Review
For idled production lines and damaged equipment: prepared PSAK 236 impairment indicator documentation and referred to management for formal recoverable amount testing; independently estimated replacement cost for all major asset categories and compared to current insured values.
Outcomes
| Result | Metric | Strategic Impact |
|---|---|---|
| Ghost assets eliminated | Multiple assets removed | Balance sheet corrected; future depreciation charge right-sized; P&L distortion removed |
| Unrecorded assets capitalized | New assets added to FAR | Balance sheet more complete; depreciation coverage now correct going forward |
| Impairment indicators | 2 production lines referred | Management aware of impairment exposure before audit; provision decision made proactively |
| Group audit reliance | JCSS report accepted | No duplicate testing by overseas auditors required; audit completed on schedule |
| Insurance gap remediated | Material under-coverage corrected | Factory assets now adequately insured against fire, flood, and natural disaster |
Frameworks Applied
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