NON CURRENT ASSETS MANAGEMENT AND ORGANISATION

PERFORMANCE.

A CASE STUDY OF RECKITT BENCKISER (NAIROBI}.

BY

MOGERE COLLINS,

BBA/16588/72/DF.

A REASEARCH DISSERTATION SUBMITTED FOR THE

REQUIREMENT OF THE AWARD OF BACHELORS

DEGREE IN BUSINESS ADMINISTRATION.

KAMPALA INTERNATIONAL

UNIVERSITY.

NOVEMBER 2010
 DECLARATION
I MOGERE COLLINS do declare that this research is my original work and has never
been submitted to any university for any award.
Where the works of others have been cited, acknowledgement has been made.

Signature.......... ~ -.. .................... ... ..

Date .. .. . .... ....... ~ .1. .~ I. lC?./.~...........................

ii
 APPROVAL

I certify that the research submitted was done under my supervision.

SUPERVISOR

NAME: MR. RUTEGANDA MICHAEL

SIGNATURE .. ~ ~ · · · · · · · · · · · · · · ·

0 9. \ v~J lO
DATE ..................................................................... ..

111
 DEDICATION
I dedicate this research project to my loving parents ANGELINE AND MOSES
MOGERE for their full support during my entire period of carrying out this research also
wish to extend thanks to ALEX and DAN

iv
 ACKNOWLEDGEMENT

The task of completing this work has been tireless and expensive both in terms of money
and time and depended upon very many people for assistance, encouragement and
guidance.

I thank God for sustaining me through the exercise.

I am indebted to Kampala international University and in particular the faculty of

Business and Management for allowing me to carry out this research. I would like to
thank my supervisor MR. RUTEGANDA MICHAEL for his guidance technical support
and for taking his time to go through this work.

I would wish to extend a bunch of thanks to: COLLINS MOGERE

V
 Table of contents
PAGE
DECLARATION....................................................................... '(i)
APPROVAL............................................................................. (ii)
DEDICATION.......................................................................... (iii)
ACKNOWLEDGEMENT............................................................ (iv)

CHAPTER ONE
1.0 Introduction ..................................................................... .
1.1 Background of the Study....................................................... 2
1.1.2 Background of the Case Study................................................ 3
1.2 Statement of the Problem...................................................... 4
1.3 Purpose of the Study............................................................ 4
1.4 Objectives of the Study ...................................................... .. 4
1.5 Research Questions ........................................................... . 5
1.6 Significance of the Study .................................................... .. 5
1.7 Scope of the Study ........................................................... .. 6
1.8 Conceptual Framework ....................................................... . 7

CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction...... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Management of Non CuU"ent Assets......................................... 8
2.2 Recognizing the Cost of Non-Current Assets.............................. 1O
2.3 Determination of the Cost of Non-Current Assets ....................... . 11
2.3.1 Accounting for Depreciation ....................................... . 12
2.3.2 Depreciation Methods .............................................. .. 13
2.3.3 Acquisition and Disposal ofNon-Current Assets during a Year 14
2.4.1 Need for Internal Management of Non-Current Assets......... 15

vi
 2.4.1 Ways Used in Non-Current Assets Management................. 16

CHAPTER THREE
METHODOLOGY
3.0 Introduction .................................................................... . 18
3.1 Research Procedure ........................................................... . 18
3.2 Research Design .............................................................. . 18
3.3 Target Population ............................................................. . 18
3.4 Sampling Design and Sampling Size ...................................... . 19
3.5 Sampling Technique .......................................................................... . 19
3.6 Sources of Data.................................................................................. . 19
3.7 Methods used in data collection ......................................................... . 19
3.7.1 Interviews................................................................................ 19
3.7.2 Observations............................................................................ 19
3.7.3 Documentary Review.............................................................. 20
3.7.4 Quest10nnaire. .. . . . . .. . ... . . . . . . ... .. ... .. . . . . . .. .. . . .. .. . . . ... . . . ..... 20
3.8 Data processing and analysis...................................................... 20
3.9 Limitations of the study.......................................................... 20
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.0 Introduction ........................................................................................ . 21
4.1 Bio-Data Presentation......................................................................... . 22
4.1.1 Gender..................................................................................... 22
4.1.2 Age Distribution...................................................................... 23
4.1.3 Level of Education.................................................................. 25
4.2.4 Period of Service..................................................................... 27
4.2 Managing Director's Background Information.................................. . 28
4.3 Response Rate from the Study ........................................................... . 29
4.4 The Relationship between Non-Current Assets Management and
Organizational Performance .............................................................. . 29

vii
 4.4.1 Documentation of Non-Current Assets................................... 31
4.4.2 Do Non-Current Assets Adhere to GAAP? ............................ 31

CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.0 Introduction......................................................................................... 32
5.1 Findings............................................................................................... 32
5.2 Conclusion........................................................................................ 33
5.3.l Recommendations.................................................................. 34

Appendices
Appendix A Questionnaire.............................................................................. 37
Appendix B Interview Guide Questionnaire............................................... 42
Appendix C A flowchart showing the organization's structure................... 43
Appendix D Budget and time frame ...................................................... .44

REFERENCES..................................................................................... 35

List of Tables
Table 1: Sample distribution in each department................................ .. 17
Table 2: Sex distribution................................................................. 19
Table 3: Age.................................................................................. 20
Table 4: Level of Education.............................................................. .. 22
Table 5: Period of Service................................................................ .. 23
Table 6: Respondents' rate on documentation procedure..................... 25
Table 7: Respondents' rate on GAAP................................................ .. 26

viii
 List of Figures
Fig. 2: Bar chart showing gender distribution ..................................... . 22
Fig. 3: Bar chart showing respondents' age ....................................... . 24
Fig.4: (a) Pie chart showing education level... ...................................... . 26
: (b) A bar chaii showing education level... ................................................ . 26
Fig. 5: Respondents' period of service .............................................. . 28
Fig. 6: A pie chaii showing "Yes" response rate on
Gender pertaining documentation of non-current assets .......... . 30

Fig. 7: A pie chart showing respondents' rate on GAAP .................. . 31

Abbreviations
P.O Purchase Order
GAAP Generally Accepted Accounting Principals
ICT Information and Communication Technology

ix
 CHAPTER ONE

INTRODUCTION

According to the dictionary of finance and accounting, non-current assets are those items
in an organization or firm that are held for a relatively long period of time for a purpose
of providing a service for the business which owns them. Examples of non-current assets
are land, buildings, machinery, furniture and equipment.
Microsoft Encarta (2006) defines non-current assets as those possessions or valuables
belonging to a business or organization that are used over a long period of time.
Examples of physical non-current assets include factories, offices, machinery, and
furniture and office equipment. But some of the non-current assets are intangible such as
trademark, brand, goodwill (for example good relationship with the customers of the
business), etc.
Louderback, Fried back, Plewa survey of finance and accounting (2003) says that: all
assets that are not classified as current are non-current. Non-current assets have lives
longer than one year or one operating cycle and for the most part are used in the business
and are not converted into cash.
Property, Plant and Equipment
Most companies especially manufacturers, own property, plant and equipment, land,
buildings, machinery, office equipment and all other long-lived physical assets used in
the business appear in this category Dubrin(2003) . Accumulated depreciation is the
amount of wear and tear that the company has taken or its assets since they were
purchased. This is the amount of asset cost that is charged off as an expense as the asset
is used and its benefit is consumed. Accumulated depreciation does not represent,
contrary to popular belief, an amount of cash that the company sets aside to replace its
assets. Nor is it the change in market value of an asset from the beginning to the encl of
the period Nkoba (2002). This confusion and others associated with depreciation will
receive considerable attention later in the chapter.

1
Other Non-Current Assets
As the term suggests the term is used to show assets that do not fit neatly into any of the
enumerated categories. Examples of other assets depend on the company and the business
it conducts like Reckitt Benckiser; its principle activities are greased towards products
line Woolf (1994).
Some intangible assets such as patents and copyrights might appear in this category.
Non cunent assets are useful in companies in that they do help the company secure loans
via providing loan security .Non current assets usually amount to large sums of money
and in this way they can help companies clear up their debts in cases of winding up
Challenges are however poised when having too little too much of Non current assets,if
this is the case companies having too much of its assets as non current might face
problems when it needs to face a sudden financial crisis and other emergencies which
require ready cash. On the other hand having too little of non current assets would raise
questions on a companies asset level and its financial balance

1.1 BACK.ROUND OF THE STUDY

Management of non-current assets in an organization is of great importance in running
the organization efficiently on its daily operations Spicer anc!Pegler(1971). If those non-
current assets are not managed properly, then there is the likely chance that organizations
will not perform as expected. The performance of organization depends largely on how
their resources are allocated and their ability to adapt to a changing condition and
therefore there is a great need of the efficient internal control of an organization's non-
current assets. Successful organizations know how to mange their non-current assets
efficiently to accomplish organizational goals efficiently and keep those goals in time
with changes in the external environment, such as those brought about by technology,
legislation and competitors Kreitner (2002).
The non-current assets in any organization are maintained to ensure that assets are safe [n
regard to good working conditions by checking and repairing them regularly. When such
process is not well exercised, it leads to misallocation of resources, which had been taken
over by dishonest staff or management. thus resulting into failure to achieve the
organization's desired goals.

2
1.1.2 Background of the Case Study

Reckitt Benckiser group of company is a manufacturer and supplier of industrial

chemicals world wide. Reckitt Benckiser was founded in (I 923) then spread its wings to
other regions later including Kenya.
Reckitt Benkiser(K), is headed by a managing director (MD) assisted by four directors
who include; Country Financial Controller, Procurement Manager Sales Department
Manager and Director of Information Technology (IT), with a total staff compliment in
excess of 170. Particular emphasis has been placed on infrastructure investment and the
company is extremely well resourced with modern office facilities, a fully integrated JCT
network, comprehensively equipped repair workshops, efficient manufacturing facilities,
mobile service teams, large product and spare part stocks and training facilities which are
used for both internal and external training courses.

1.2 STATEMENT OF THE PROBLEM

In recent years, most of the organizations or companies 111 Kenya have been facing
difficulties in their daily perfo1mance. The problem rises when management tries to set
management of its non-ctment assets accounting record, which does not match or comply
with the International Accounting Standards (ISA) on management of non-current assets
Nkoba (2002). This has resulted to losses which lead to collapse or failure in business
and closure of its operations. The reason given by the official for the collapse of many
organizations is due to poor management is lack of qualified assets mangers and
inefficient or inadequate records of the organization's non-current assets
(www.rcckittbenkiser.com)

3
 1.3 OBJECTIVES OF THE STUDY
The study evaluated effectiveness and efficiency of internal control over non current
assets and its contribution to the daily operations of the organization which in turn
contribute to the performance of the organization.
The following are the objectives of the case study:

• To find out whether or not accounting on non-current assets and related

records are properly recorded, kept and maintained in accordance with its
stated rules and regulations.

• To asses efficiency and effectiveness of internal control over non-current

assets on the daily routine of an organization.

• To find out whether or there is the higher professionalism in monitoring the

performance of and accounting of non-current assets in organizations.

• To suggest and recommend ways that lead to the establishment of proper

internal control structured over non-current assets.

1.4 RESEARCH QUESTIONS

The study sought to answer the following questions:

• How the recording and documentation procedure is carried out for assets soon
after they are acquired?

• To what extent does the accounting of non-current assets adhere to general

accepted accounting principles?

4
 • To what extent is the controlling of non-current assets a function of the
company management?

• Do the maintenances, repairs and replacement of non-current assets increase

the entity's capacity?

1.5 SIGNIFICANCE OF THE STUDY

The significance of the intended research was:
• Finding a proper way of monitoring non-current assets in organizations.

• Enable a researcher to acqmre practices, training about how to control or

manage non-current assets.

• The study made the researcher meet the need of course requirement as a
partial requirement for award of a Bachelors of Business administration.

• The findings, suggestions and recommendations are expected to be useful

materials for future researchers and other users of management and control of
non-current assets.

• The company's top management was in a position to gauge whether its non-
current assets are fully utilized to enhance continuity of the company and also
sought to find out whether employment vacancies are available to people
residing near the company.

5
1.6 SCOPE OF THE STUDY
The study focused on the aspect of Non current assets and organization performance but
was restricted to Reckitt Benckiser Ltd. The main areas of the study was in accounting
department, purchasing department, engineering department, store department and
operations department for the period between 2009-20 IO.Due to limited time and scarcity
of resources the data collection took one month of which data analysis followed

6
 1.7 CONCEPTUAL FRAMEWORK

.. •• •
·-••>> . \

Independent
variables
-, '-· ·.. · •·.··.·n.•.>c-< ,.· •.·

Intervening variables
...~,_., ·."•
'.
. ..
Dependent variables

Organization
1,, •
Fixed asset
management ' - • Accounting
concepts
?-; ~
,:---.
y
. performance

-Low cost of production

-Plant and ,.
adopted ,.. -Time saving
machinery
\
• Company
policies on
,.
··.

• -high productivity
-Land ·.•
l fixed asset
management ; -easy supervision

• Depreciation
,,
methods •··
adopted
• Fixed assets ·•.;
decision ...
• Value of
assets owned

NOTE:
The above illustration explains the relationship between independent, dependent and intervening
variables of the research topic
The independent variable is fixed asset management, the dependent variable is organization
performance which rely on fixed asset management the intervening variable are those that link
both the dependent and independent variables and they include accounting and depreciation
methods used

7
 CHAPTER TWO
LITERATURE REVIEW

INTRODUCTION

The chapter is designed to discuss about literature review concerning management of

non-current assets. It constitutes the review of related literature, proposed theory and
principle of the study, recognizing the cost of non-current assets, depreciation methods of
non-current assets, acquisitions of non-current assets, ways on non-current assets
management and lastly its empirical management.

2.1 MANAGEMENT OF NON-CURRENT ASSETS

Meaning of management;
Kreitner (2002) defines management as the process of working with, through others to
achieve organizational objectives in a changing environment.

Fixed Asset Definition

Manasseh, (1991), defines current assets as items that are owned by the business and are
used in the course of its normal activities, rather than being held or produced for sale,
those assets are used, or more accurately, used up in production are classified as current
assets. Examples of non-current assets are land and buildings, office equipment, plant and
machinery, vehicles and other intangible assets. While some non-current assets such as
land and buildings, can expect to hold or even increase their value, others will need to be
replaced in the future not only will you need to plan for this expenditure (preparing cash
flow statement may help you to do so), but you will need to bear in mind that this type of
non-current assets are subjected to depreciation.
Thee are two types of non-current assets; tangible and intangible assets. An intangible
asset is an asset with no physical form and it includes patents, trademarks, copyrights and
royalties. The non-current assets account for 69% of the company's entity which generate
over 200000us$ profit for Reckitt Benckiser company which has its manufacturing
industry in Nairobi, industrial area (www.reckittbeckiser.com)

8
Principal of Accounting and Auditing (2000) NBAA defines non-current assets as
those held with the intention of being utilized in the process or earning revenue rather
than the purpose of sale in the ordinary course of business, such as plant machinery,
office equipment, motor vehicles, furniture and fixtures. These assets are reported at the
costs less depreciation.
✓ Tangible Non-Current Assets
It includes plant and machinery, fixture and fitting equipments, land and buildings.
Tangible non-cmTent assets denote that they have physical substance. This category is
further grouped in to:

• Fixed estates subject to depreciation, which includes all the tangible non-
current assets excluding land, they have a useful life.
e Land, this is not subject to depreciation and has an unlimited term of existence.

✓ Intangible Non-Current Assets

They include patents, copyright, trademarks, goodwill and leasehold. Intangible non-
current assets are those assets which are in operation of the business but have no physical
substance and are non-current excluding accounts receivable Nkoba (2002). Copy-right-
it is a federally granted right to authors, sculptors, painters and other artists for their
creations. Reckitt Benckiser Company acquired a copyright which gave the company a
good image which led to a high performance in the organization due to proper
management of the non-current assets. Copyright is granted for the life of the creator plus
70years. It gives the creator an exclusive right to reproduce and sell the artistic work or
published work. If purchased, the cost includes the purchase price plus any legal fee, if
developed by the owner (the creator) no cost can be assigned (capitalized). (Reckitt
benckiser financial and accounting brochures).

✓ Investments Non-Current Assets

These are regarded to be permanent in nature. They include investment m subsidiary
companies and trade investments Nkoba(2002).

9
The cost of non-current assets under historical cost convention is its purchase price or its
productions cost incurred in bringing the non-current assets to working conditions, for its
intended use at its intended location.

2.2 RECOGNISING THE COST OF NON-CURRENT ASSETS

It provides the principles that should be adhered to in acquiring the cost of non-current
assets. Every organization has its procedures that it follows in acquiring non-current
assets. However, there are standard procedures that should be followed in any
organization.
According to different writers such as Lyengar, M.B (1990), Spicer & Pegler (1971),
Manasseh, P.N (1991), views concerning the procedures of determining the cost of
current and non-current assets, are asserted that when acquiring them, the procedures
should be adhered to, the same should be followed and maintained. These procedures are:

I. That there are formal policies and procedures regarding authorization for capital
expenditures to be made by individuals or committee.
2. Capital expenditure budget are made in which the asset to be acquired are
detailed, reviewed by the accounting depa1iment and other committees and finally
from the appropriate authority obtained
3. Approval is communicated to the accounting department, who, in turn, maintain
cost against approved figures to guard against over spending.

The non-current assets record should provide sufficient details for the company's
needs. Basic details include the following: name of assets, location of assets, example
department and Shelf Number, Name of Vendor, Maker's Serial Numbers,
Insurances, acquisition dates, original cost, transportation costs, estimated residual
value, depreciation rate, accumulation depreciation, capital improvement, proceeds on
disposals, etc.

10
2.3 DETERMINATION OF THE COST ON NON-CURRENT ASSETS
The cost of non-current assets includes the following:
✓ Non-Current Assets Purchased
The purchase price less any trade discount, sales and other taxes directly charged to
assets, site preparation (includes survey), demolition cost, delivery and handling costs
(e.g. clearing and forwarding costs),transport to site, installation cost and professional
fees (e.g. legal ad engineers' fees) Manasseh(l991)
✓ Interests on Loan
According to Lyengar{l990)Interest charged in borrowed fund to acquire a particular
non-current asset should not be debited to the cost of non-current asset. The accounting
standard however, allows interest charged on capital borrowed to acquire non-current
assets to be included in the cost only that applicable to period prior to the commissioning
of the non-current assets. The amount included in the cost should be disclosed in a way of
a note to the accounting department.
✓ Non-Current Assets Acquired on exchange basis
According to Lyengar{l990) Where non-current assets have been received through
donation and cost of which is not known, the value of those assets are either the market
value or value arrived at by an independent professional evaluator.
✓ Cost Improvement and Repairs
The expenditure on improvement and repair to a non-current asset should only be
considered as a cost of non-current assets where such expenditure will enhance future
earning capacity of non-current assets over and above what would have been earned
without expenditure. Future benefits may include an extension of an asset's full life, an
increase in production capacity and improvement in quality output or reduction in the
operation cost. Saleemi (1989).

11
 2.3.1 Accounting for Depreciation
Spicer & Pegler (1971) Depreciation is the measure of wear and tear of a non-current
asset. Depreciation includes those assets that have limited useful life. Depreciation also
means measw-e of consumption or reduction in the useful economic life of a non-current
asset arising from use, affluxion of time or obsoleteness through technological or market
changes. It means that pai1 of the cost of assets used in the period, depreciation must be
treated as an expense and debited to the profit and loss account, otherwise the profit will
not be correctly assessed. The amounts debited in the profit and loss account are retaining
in the business.
Basic factors for calculating depreciation are:
(a)The cost of assets

(b)The estimated residual or scrap value at the end of its life

(c)The estimated number of years of its life

Depreciation shall be allocated to different accounting periods in methods appropriate to

the class of non-current assets involved and the method shall be adopted consistently
from period to period unless altered circumstances justify a change. The depreciation
method adopted in respect of each class of non-current assets shall be disclosed in the
financial statement. Spicer & Pegler (1971)

2.3.2 Depreciation Methods

There are various methods used to calculate the depreciations for non-current assets that
are owned by organizations. NKOBA (2002)
The following are some of the methods of calculating depreciations used by various
organizations
(a)Sum of the year methods

(b)Straight line methods

(c)Reducing balance methods

12
(a)Sum of the Year Digit Methods
According to Nkoba (2002) in this method, a large portion of a cost of an asset is
allocated to the early years of its use. The depreciation rate to be used is the fraction of
which the numerator is the remaining years of useful life. Formula of calculating the
amount of depreciation is:
Depreciation= Remaining life* (Cost- Scrap Value)/ Sum of the Years Digit

(b)Reducing Balance Method

According to Nkoba (2002) under this method, the rate of percentage of depreciation is
fixed, but it applies to the value at which the assets stand in the book at the beginning of
the year, which means that the depreciation of the previous year is being deducted in
order to obtain balance that is depreciated. The method ha an attendance of providing a
huge depreciation amount when an asset is still new and tends to decrease as the asset s
put to use for a long period of time until it becomes negligible.
This method can be calculated through the following formula:
R=l-S/C
Whereby:
R = rate of depreciation
N = number of years
C = original cost of the assets

(c)Straight Line Methods

According to Meighs (1976) under this method, unequal position of the cost of assets is
allocated to each period of use consequently. This method is appropriate when usage of
assets is uniform from one year to another. Depreciation expense is arrived at by using
this formula:
D=(C-S)/N
Whereby:
D = annual Depreciation
C = cost of assets
S = scrap value
N = number of years for an assets to be used

13
2.3.3Acquisition and disposal of non current assets during a year
According to Nkoba (2002) Assets valuation, during the useful life of an asset it wear
and tear become obsolete, they must be scrapped, sold or traded in on new assets. When
assets become unserviceable, that is wearing out or become obsolete, they should be
disposed off.
When assets become unserviceable the management decides to do the following for the
benefit of the organization:
(!)Sale to declare the broker

(2)Sale to employee

(3)Use in the organization as scrap or spare parts

Various reasons that can lead to disposal of assets:

(I )Change in technology.

(2)When assets become damaged and beyond repair.

(3)Long use (full life) that may cause it to reduce its efficiency.

(4)Out of fashion due to change in market taste.

The following are situations in which assets can be disposed:

Disposal at loss price:This is selling of asset below its book value. This reflects the
loss of disposal. This loss has to be separately disclosed in the income statement so
that it does not affect the distributable income in terms of cash.

Disposal at a price above the book value:This situation may occur some time an
asset can be disposed in profit. Means sold above the book value. Now it may be
recalled that since the residual value and useful life of non-current assets reflecting
gain on disposal and this gain is separately disclosed in the profit and loss account ad
identified not available for distribution in cash.

14
 Disposal at price equal to the book value: at this situation, the disposal process
reflects no loss or gain on disposal of non-current assets.

Suggested steps, which are required to be followed during the disposal of non-current
assets are:
(I )Transfer the cist price of assets account to disposal account

(2)Calculate and record the accumulated depreciation

(3)Transfer to total accumulated depreciation to date of sale from provision for

Depreciation to disposal account

(4)Record the sale procedure or the trade value

2.4 NEED FOR INTERNAL MANAGEMENT OF NON-CURRENT ASSETS

According to Saleemi (1989), the segregation of duties should exist within the non-
current asset cycle: most systems of internal control rely on assigning certain
responsibilities to different individuals or segregating incompatible functions. Such
segregation of duties intends to prevent one person from having both; access to assets and
responsibilities should be ordinary segregated:
• Transaction authorization.
• Custody of assets.
• Reconciliation of physical non-current assets and liability to records.
• Transaction initiation (Acquisitions and disposal of assets).

Therefore, the person responsible for the non-current assets acquisition, disposal and
recording should be responsible for only such functions, and have no such access to other
than the assigned functions. In addition, people who are responsible for non-current
assets transaction processing should have these responsibilities for non-current assets
master file that neither maintains nor updates access to the non-current assets master file.
In the manual system, segregation of duties may enforce administratively, based on the
assignment of job responsibility. In an automated system, segregation of duties is
typically enforced through the use of automated access restrictions.

15
2.4.1 Ways used in Non-Current Assets Management
Non-current asset management procedures include all administrative aspects, from the
initiation of a capital proposal to its evaluation, approval and follow-up. These
procedures should include:
(I )The definition of capital or project expenditure
(2)Written policies and procedures

(3)Authorizations and approval levels

(4)Fonns, which must be completed

(5)Post-audit requirements

Once an asset is purchased, it should then be subjected to operating and maintenance

procedures. Finally, when assets are no longer required, they should be covered by non-
current asset disposal procedures.
Using analytical valuables of internal controls put in place, accounting concepts adopted,
company policies, depreciation methods, physical inspection by audit staff before
payment is made and procurement measures shows the organizational perfonnance
attained by Reckitt Benckiser Company (www.reckittbenckiser.com).
The audit staff, which is rare, plays a crucial role in regulating its operations at the
company. However, due to the limited number of audit staff and poor facilitation, it has
been evident that some operation depaiiments went unchecked. This has led to poor
performance of some departments.
Reckitt Benckiser company in Kenya have been having a shortage of workers which has
led to low productivity and time wastage in search of new entrants for continuity of the
company. The company policies on fixed assets management is headed by the finance
departments which at times does not give correct accountability of how the funds were
allocated to different departments. Reckitt benckiscr journal (2009).

16
 CHAPTER THREE
METHODOLOGY
3.0 INTRODUCTION
This chapter presents the practical procedure that was employed. Rudeslam and Newton (1992)
said "the goal of a methodology chapter is to provide a clear and good description of the specific
steps to be followed. It is necessary to describe these steps in sufficient detail to permit a naYve
reader to replicate your study." (pg 60)

3.1 RESEARCH PROCEDURE

Questionnaires were designed focusing on non-current asset management and answered by
various respondents representing various depaiiments in the company. An interview guide
questionnaire was also prepared to collect data from the Managing Director of the company.

3.2 RESEARCH DESIGN

The study design was descriptive-exploratory, basically based on quantitative methodology,
accompanied with qualitative interpretation of data. this study involved a triangulation of
methods to collect data for in-depth analysis that were used to examine management of non-
current assets on organizational performance that gave me a clear picture and position of Reckitt
Benckiser company.

3.3 TARGET POPULATION

The sh1dy targeted 5 main departments (stratus) of the company, namely: Accounting ,
purchasing, Engineering, Inventories and operations departments.The company has a total of 170
employees.

17
3.4 SAMPLING DESIGN AND SAMPLING SIZE
In order to ensure representative of samples from the study population. Sampling was grouped
according to random sampling technique random sampling technique was used in picking
employees on which data was collected, thus respondents were randomly selected from staff in
Reckitt Benckiser Company. This sampling design was preferred to minimize bias in sampling
process to achieve maximum precision which gave the researcher constraints of the study.Reckitt
Benckiser senior management and other staff members were also interviewed . The target
population was small and specific which made it easier in identifying a suitable sample size.

Table 1: A sample of30 respondents was chosen out of the 170 employees:
Department Population Sample

Accounting IO 1

Purchasing 25 '
.)

Engineering 15 '
.)

Inventory 50 8

Operations 70 15

Total 170 30

3.5 SAMPLING TECHNIQUE

In this study, simple random was applied to get the respondents' especially in the distribution of
questionnaires in the department (stratus) whereby the nature of the study is technical and
innovative in the study area.

3.6 SOURCES OF DATA

I enjoyed both primary and secondary sources of data in the research study.
• Primary sources First-hand information was got through interviews.
observations, questionnaires and documentary review.
• Secondary sources: sources of data were inclusive of text books, journals,
internet. and study manuals.

18
3. 7 METHODS USED IN DATA COLLECTION
The following methods were used to gather relevant infmmation for the study:

3. 7.1 Interviews
The use of an interview guide was administered to the Managing Director of the company
although it was not strictly limited to the questions in place.

3.7.2 Observations
The company's policies on non-cmTent assets practice and procedure of the organization's
transactions were observed directly by looking at the payment vouchers in order to verify
whether the authorization of payment had been done by the rightful person. The method was
employed in order to avoid or reduce biasness by the respondent and it enabled the researcher to
observe and participate physically in the company's day-to-day operation which included
internal control of non-current assets.

3.7.3 Documentary review

This method was used in the Accounting and Assets Management departments by reviewing the
documents, records and books of accounts such as purchasing orders (P.O) and assets register
books. This method was preferred because it showed a clear picture of whether the internal
control system over non-current assets is completed and complies with company's stated
policies.
3.7.4QUESTIONNAIRE
Data was collected by the use of structured questionnaires designed by the researcher. The
questionnaires were sent to the employees and the clients of the organization . This technique
was used because all the respondents were literate the major advantage of this method include
free from bias information and enough time for the respondent to consider his or her point
carefully than in an interview
3.8 DATA PROSSESING AND ANALYSIS
Data was edited and analyzed using percentages, tables,graphs and simple Statistical modules
like central tendency frequency distribution to assess the The impact of non current asset on
organization performance. Quantitative

19
 data analysis was performed in relation to the research question
Statistical findings were interpreted in light of the objectives of the study
and conclusion was made basing on the literature review to attach more
meanmg
3.9LIMITATIONS OF THE STUDY
(I )Accounting information and business finance sources is a very sensitive
Issue, most respondents found it difficult to disclose such information

(2)Problem of infonnation access by the researcher, the management

of Reckitt Benkiser invoked confidentiality an internal use only clauses
And regulations thus leading to delay in data collection
(3)Respondents never acted in time due to uncomfortable timings especially
When they were busy with office work

(4)financial problem, this was where the researcher had to incur a lot of cost to
Acquire the required information

20
 CHAPTER FOUR

DATA ANALYSIS, INTERPRETATION AND PRESENTATION

4.0 INTRODUCTION
This chapter contains the presentation, interpretation and discussion of the findings to solve the
research problem. Tables and percentages were used to make representation of data upon which
analytical interpretation and discussion was to search for broader meaning of answers got from
analysis by linking them to other knowledge as stipulated by other scholars. It is from these
findings that the study will help draw reasonable conclusions and make recommendations that
can be useful in the management of non-current assets hence improving an organization's
performance.

The data edited and collected from the research; the numerical data like number of responses in
certain questions were analyzed in the form of a table narration and percentages. The format of
presentation is consistent with the study objectives to ease understanding. The work is sectioned
into critical subsections as, Tables, Pie charts and Bar chaiis

4.1 BIO-DATA PRESENTATION

4.1.1 Gender

The analysis of the respondents' gender is shown in table 2 below:

SEX ADMINISTRATION OTHER FREQUENCY PERCENTAGE

STAFF

Male 10 8 18 60%

Female 8 4 12 40%

Total 18 12 30 JOO%

Source: primary data

These results indicated that I 8 respondents comprising 60% were male while 12 respondents
comprising of 40% were females. This clearly showed that the male gender were the main
employees of Reckitt Benckiser group of companies.

21
The researcher found out the following results relating to gender distribution:

Fig. 2: A bar chart showing gender distribution

18
16
14

ii Male

!I Female

0
Gender Distribution

The frequencies indicate that 18 respondents were male while 12 were female. This accounts for
60% and 40% representation respectively

4.1.2 Age DistributionThe findings revealed the following age distribution. Data was collected
to determine the age of the respondents.

Table 3

A table showing respondents' age distribution

Age Frequency Percentage

20-30 yrs 0 0%

31-40 yrs 7 23.3%

41-50 yrs 9 30%

Above 51 yrs 14 46.7%

Total 30 100%

22
Source: primary data

The age profile of the respondents was analyzed and results shown in Table 3. The majority of
the respondents (46.7%) fell in the above 51 age bracket, followed by the 41-50 yrs (30%).
When combined, these two age brackets accounted for 76% of all the respondents. The least
represented age bracket was that of 41-40 yrs which consisted of 23.3% while that of 20-30 yrs
was never represented at all.

These figures demonstrated that most employees at Reckitt Benckiser Company were relatively
old

Fig. 3: Bar chart representing respondents' age

14 ,,,
12 i,,----------------i--
10 ·1 ~ - - - - - - - - - - - - - 2 ' ! -
8 Y \

:2t·1r
o-.--
i--~.!~'
-- --
.•-~I~ I"'?
20-30 yrs 31-40 yrs 41-S0yrs Above51
yrs

Source: primary field data

The frequencies indicate that none of the respondents was aged between 20-30 years, 7
respondents were aged between 31-40 years, 9 respondents were aged between 41-50 years and
14 respondents were aged above 51 year

23
4.1.3 Level of Education

The findings related to the level of education are shown in table 4 below:

LEVEL NO. OF PERCENTAGE

RESPONDENTS

PhD 2 6.67%

Masters Degree 6 20%

Degree 10 33.33%

Diploma 6 20%

Certificate 5 16.67%

Others 1 3.33%

Total 30 100%

The above data indicates that 2 respondents had attained a PhD degree, 6 respondents had a
masters' degree, 10 respondents had 1st degrees, 6 respondents had diploma qualifications, 5 had
certificates and 1 had other qualifications.

24
Fig. 4(a): A pie chart showing the level of education of respondents

level of Education
3.33% 6.67%
ill PhD

ill Masters Degree

ill Degree
20%
ill Diploma

ill Certificate

Fig. 4(b) Bar chart showing respondents' level of education

----··-----·-·--·- '"

10
9
8 ,--
/
7
6
5
Column2
4
3
2
/
1 -~
0 J /

PhD Masters Degree Diploma Certificate Others

Degree

Source: primary data

Frequencies above indicate that 18 of the 30 respondents had university degree qualifications, 6
respondents had diploma qualifications while I had other qualification.

25
4.1.4 Period of service

The researcher obtained the following results indicating the years of service ad Reckitt Benckiser
Company of the respondents.

Table 5: A table showing the period of service as Reckitt Benckiser Company of the respondents

PERIOD/YEARS OF FREQUENCY PERCENTAGE

SERVICE

More than 5 yrs 18 60%

Between 1-5 yrs 11 36.6%

Less than I yr 1 3.3%

Total 30 100%

Source: field pnmary data

The above data indicates that 18 respondents (60) % consisted of employees who had worked at
Reckitt Benckiser for more than five years. This implies that the biggest percentage had more
knowledge of the company's operations. 36.6% of the total number of respondents had been in
the company for a period of between 1-5 years, i.e. I 1 employees. Only 3.3% of the representing
1 respondent has worked at the company for less than a year.

26
Fig. 5 a bar chart showing respondents' period of service

More than 5 Btn 1-5 years Less than a ear

years

4.2 Managing Director's background information

An interview was administered to the Managing Director of Reckitt Benckiser Company. He

has been in service in the company for a period of 11 years. His level of qualification was a PhD
in the field of Engineering.

4.3 Response rate from the study

The study targeted a sample of 30 respondents who were supposed to fill the questionnaires
distributed to them from the Procurement Manager's office. Of these, all the respondents
answered and returned the questionnaires to the researcher. This was a I 00% response rate. An
interview as intended was also administered to the company's Managing Director.

27
Table 5

Sample Targeted Actual no. of Percentage

Respondents

Accounting 1 I 3.3%

Purchasing 3 3 10%

Engineering 3 3 10%

Inventory 8 8 26%

Operations 15 15 50%

Total 30 30 100%

Source: primary data

4.4 THE RELATIONSHIP BETWEEN NON-CURRENT ASSETS MANAGEMENT AND

ORGANIZATIONAL PERFORMANCE

4.4.1 Documentation of non-current assets

The researcher asked a question on documentation procedure and the findings were as follows:

28
 Table 6: A table showing respondents' take on docnmentation procedure

SEX AGREE PERCENTAGES DISAGREE PERCENTAGES

Male I 9% 10 53%

Female 10 91% 9 41%

TOTAL 11 100% 19 100%

Source: primary data

The findings above revealed that most men disagreed with the documentation procedure of non-
current assets soon after their acquisition. Thus, it was a clear presentation that some non-current
assets were omitted from the company's books, yet they existed physically. Their book values
and wear and tear were exclusive hence organizational performance was low due to mis-
documentation of the company's non-current assets.

Fig. 6: A line graph showing "Yes" response rate on gender pertaining to documentation of
non-current assets

Response rate
9%

BIT Men
91% E3 Women

Source: primary data

29
4.4.2 Do non-current assets adhere to GAAP?

The researcher asked a question on GAAP complacency. Having emerged the best in
manufacturer of industrial related chemicals, Reckitt Benckiser was continually going to uphold
its internal and external measures to be always at the top.

The accounting of non-current assets was effectively and efficiently attained. A 100% response
rate from the respondents was out- rightly brought out in that 18 respondents (male) and 12
respondents (female) clearly ascertained that the GAAP was fully functional.

Table 7: A table showing respondents' rate on GAAP

SEX AGREE PERCENTAGE

Male 18 60%

Female 12 40%

TOTAL 30 100%

Source: primary data

Fig. 7: A pie chart

showing respondents'
response rate on GAAP

Male

Female

30
 CAPHTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.0 INTRODUCTION

This chapter gives an outlay of the summary from the findings, conclusions based on concrete
observations, recommendations for action on observed problems while giving possible strengths
and weaknesses of the recommendations made and lastly suggesting areas for further research as
per the identified weaknesses on the research findings.

5.1 FINDINGS

On application of all methodologies in this research, the researcher found out that the company's
performance had been based on the following:

• The research indicates that Reckitt Benckiser has somehow have its records
properly kept and maintained in accordance with its stated regulations

• The findings revealed that the employees of Reckitt Benckiser lie between the age
of thirty one to fifty one, the figure demonstrated that most employees of the
company are relatively old.
• Reckitt Benckiser Company has recruited reasonably qualified, experienced
personnel, with efficient professionalism in monitoring the performance of and
accounting of non current assets.This has enabled the company's Managing
Director to effectively execute his tasks and therefore increase the company's
performance level.
• Labor turn-over has been negligible except until the restructuring process which
has affected some staff members especially those who did not meet the minimum
qualifications in their respective departments.
• Stock control procedures are in place and this reflects no misappropriation
through mishandling of assets and inventory.
• The research indicates that Reckitt Benckiser has more male employees to female
employees

31
 • Finally, all the non-current assets are fully recorded in the Asset Register, their
depreciations inclusive too, which made it easier for verification by the
researcher.
• Co-operation; some of the staff were not co-operative during my research study.
• Delay in getting required information: the required information from top officials
affected the study.

5.2 CONCLUSION

Non-current assets at Reckitt Benckiser Company situated in Nairobi Kenya, has an impact on
the organization's performance. It is the management team that promotes the efficiency and
effectiveness of the assets therefore easing daily supervision by top management which saves on
time and ensures high productivity.

Reckitt Benckiser Company has recruited reasonably qualified and experienced workers. This
has enabled the company to effectively execute its tasks worldwide including East Africa and
therefore increase performance level though it's still below the 100% level. Accounting of non
current assets to a larger extent adhere to general accepted accounting principles .. Controlling of
non current assets has become an integral pati of Reckitt Benckiser's management function

Though there is limited staff in the accounting department, it has segregated most of its activities
to ensure accuracy and reliability of records in the company when its books of accounts are read
at the end of the financial year. The company has maintained its performance based on ensuring
continuous compliance with the Financial and Accounting concepts adopted by the management
rendering Reckitt Benckiser a fast paced. Entrepreneurial business. Some are surprised to learn
that the company's history span 150years of innovation for consumer across the world. Reckitt
Benckiser's drive for financial performance and social responsibility today can be seen in its
deep roots as shown in its time line.

32
5.3 RECOMMENDATIONS

The following areas, if well considered, will improve the organization's performance basing on
non-current asset management:

o There is need for strong and serious scrutiny of non-current assets since some of
them need to be boarded off.
o All payment vouchers may be authorized before payments are made and pre-audit
must be exercised.

The areas that the researcher suggested required more emphasis included:

o Evaluation of the accounting system at Reckitt Benckiser company

o Proper management of the non-current assets to attain desired organization
performance

5.3.1 AREAS FOR FURTHER STUDIES

• Effects of fixed asset management on organization performance.

• Impact of internal control system o organization performance.

33
 APPENDIX A

REFERENCES

I. Iyengar, M.B (I 990) Advanced Accounting: 2nd Edition, Daryagani Printing Press,
New Delhi, India.

2. Kreitner R(2002) JV!anagement 9th Edition, Houghton Mifflin Company, New York
USA.

3. Maginn.J.L(I 992) (et a[) Managing investment portfolio, 2nd Edition Gorham &
Lamont Publishers, New York, USA.

4. Manasseh, P.N (1991), Auditing, Nairobi Kenya.

5. Mills R. W, (I 999),fimdamentals of accounting and managerial finance; 4th Edition.

6. Nkoba A.J (2002) Asset valuation, NBAA lvfanual, Dar es salaam, Tanzania.

7. Saleemi; N.A (1989),auditing simplijied;2 nd Edition, Nairobi Kenya.

8. Spicer & Pegler (I 971 )Book keeping and accounts, 7tl' Edition, HL Publisher Limited
Great Britain.

9. Meighs - Mosich Johnson, Bzarsk(I 976), Financial accounting, 2nd Edition, McGraw
Hill Ryeisoni Limited, Canada.

I 0. Meigs and Meigs(! 995),Financial accounting, 8th Edition, Library of Congress

Cataloguing in Publication data.

11. Nkundabanyanya(2003) Handbook of intermediate accounting, Kampala Publishing

Company, Kampala, Uganda.

l 2. Drury P. (1988); JV!odern business administration 6th Edition, London, Pitman

Publication.

13. Woolf, E. ( 1994) Audi1ing today, 5th Edition, London. Prentice Hall.

14. Walter (1962). Accounting, McGraw Hill booking Company USA.

15. Louderback, Friedback, Peiewa (2002) Survey of accounting. Nairobi, longhorn

publishers.

16 Microsoji Encar/a (2006).

34
17 Reckitt Benckiser Financial and accounting brochures

I8www.reckittbenckiser.com

35
APPENDIXB

QUESTIONNAIRE
I am MOGERE COLLINS a final year student of Kampala international
University pursuing a Bachelors Degree in Business Administration (Finance and
Banking). I am carrying out an academic research aimed at examining the impact
of non-current assets management on an organization's performance. This is a
requirement for the award of a Bachelors of Business Administration degree of
Kampala international University.
I would be grateful if you could fill the following questionnaire as part ofmy data
collection tool. All information will be kept confidential.
How to answer:
1. Tick in the appropriate boxes.
ii. Where your opinion is required, you can write it down briefly.
111. Please answer all questions.

36
SECTION A
Bio-data of respondents

Please tick an appropriate box where necessary.

I. Job designation/title: .......................................... .

............

2. Gender/sex: MaleD Female D

~
.). Age: 20-30 yrs
D

31-40 yrs
D

41-50yrs
D

Above 5lyrs
D

4. Education level:
PhD
D

Masters D

Degree D

Diploma D

D
Certificate

D
A-Level

37
 5. Other professional qualifications ................................. .

6. For how long have you worked at Reckitt Benckiser Company?

More than 5 years D

Between 1- 5 years D
Less than I year D

SECTIONB

I. Does your policy on management of non-current assets comply with the

General Accepted Accounting Principles (GAAP)?

YES D NO D
If yes, briefly explain how......................................... .

2. ls there any relationship between non-current assets management and

organization performance?

YES
D NO
D

If yes, briefly describe the relationship and ifno, give the reason(s) why ....... .

3. Do non-current assets affect any stage of production?

D D
38
 YES NO

If yes, briefly explain how and ifno, give the reason(s) why.............. .

4. Are the internal control, accounting policies and procedures implemented in

your organization?

YES
D NO
D

If yes, please comment on its implementation towards organization's

performance ....

5. Is there any problem(s) on implementation of accounting policies on the

management of non-current assets? I
YES
D NOD

If yes briefly explain those problems ................................. .

6. Does the management of non-current assets increase the entity's performance?

YES NO

D D
If yes, how ..................................................... .

39
7. How do the non-current assets affect the sustainability of the company? .....

8. Is there any problem with the computation of depreciation as the preferred

way used in the management of non-current assets? .................... .

9. Is there a formal organizational chaii defining the responsibilities of

purchasing, receiving, recording, approving and performing of the non-current
assets? ........................................................ .

40
APPENDIXC

INTERVIEW AND QUESTIONNAIRE GUIDE

Dear respondent,

I am a final year student of Kampala international University

carrying out a research on the impact of non-current assets management on
organizational performance "A case Study of Reckitt Benckiser Company,
Kenya". This research is conducted in partial fulfillment for the award of a
Bachelors of Business administration (Finance and banking) degree of Kampala
international University. All information provided will be treated with the highest
degree of confidentiality and is purely for academic purposes. The success of this
study greatly depends on your responses. I kindly request you to spare some time
and answer these questions

I. What position do you hold at Reckitt Benckiser Company?

2. For how long have you been in service at the company?

3. What is your highest level of qualification?

4. What criterion do you use in ascertaining cost of non-current assets?

5. Does the company manufacture the items in trade mentioned earlier in the

case study?

6. Explain briefly about mcome generation by non-current assets in your

organization.

41
8. The company has been in existence for the last 63 years. How have you

managed to keep the non-current assets since they comprise 69% of the

company's entity?

9. State briefly the non-current assets that have rendered it difficult for the

company to attain its desired performance in the business market.

I 0. What measures have been in place to ensure that organization performance is

attained via management of non-current assets?

11. According to you, what relationship exists between non-current assets and

organizational performance

12. How does your company appraise the performance of the employees?

42
 APPENDIXD

FLOWCHART SHOWING ORGANIZATIONAL STRUCTURE FOR RECKITT

BENCKISER COMPANY (KENYA)

I Managing Director

I
Finance Procurement IT Sales
Manager Manager Manager Manager

Accounts
Dept
-
Inventory
Dept
- Engineering -~
Dept
Purchasing -
Dept

Regional Operations Customer

Secretary Care

43