:Fixed asset

In modern financial accounting usage, the term fixed assets can be ambiguous. Instead, the term non-current assets (used by the IFRS and U.S. Generally Accepted Accounting Principles (GAAP) XBRL{{Cite web|url=http://xbrlview.fasb.org/yeti/resources/yeti-gwt/Yeti.jsp#tax~(id~174*v~6430)!con~(id~4379966)!net~(a~3474*l~832)!lang~(code~en-us)!path~(g~99043*p~0_0_2_0_1)!rg~(rg~32*p~12)|title=Taxonomy Viewer|website=xbrlview.fasb.org}} reporting taxonomies) is preferred when referring to assets that will not be liquidated in the current fiscal period. Specific non-current assets (Property, plant and equipment, Investment property, Goodwill, Intangible assets other than goodwill, etc.) should be referred to by name.{{Cite web |title=IFRS - IFRS 3 Business Combinations |url=https://www.ifrs.org/issued-standards/list-of-standards/ifrs-3-business-combinations/ |access-date=2025-04-23 |website=www.ifrs.org}}

A baking firm's current assets would be its inventory (flour, yeast, etc.), the value of sales owed to the firm from credit extended (i.e. debtors or accounts receivable), and cash held in the bank. Its non-current assets would be the oven used to bake bread, motor vehicles used to transport deliveries, and cash registers used to handle cash payments. While these non-current assets have value, they are not directly sold to consumers and cannot be easily converted to cash.{{Cite web |title=A STUDY ON FIXED ASSET MANAGEMENT WITH REFERENCE TO KESORAM |url=https://jespublication.com/upload/2022-V13I1107.pdf}}{{Cite web |title=Evaluation of Fixed Assets Management |url=https://ijsrm.net/index.php/ijsrm/article/view/503}}

Non-current (fixed) assets are items of value that the organization has bought and will use for an extended period of time, typically including land and buildings, motor vehicles, furniture, office equipment, computers, fixtures and fittings, and plant and machinery.{{cite web |title=What is fixed asset management |url=https://www.ibm.com/topics/fixed-asset-management |website=www.ibm.com |access-date=14 April 2021 |language=en-us}} These often receive a favorable tax treatment (in the form of a depreciation allowance) in contrast to short-term assets.{{Cite web |title=Oracle ® FLEXCUBE Universal Banking Fixed Assets User Guide |url=https://docs.oracle.com/cd/E74659_01/html/FA/FA02_Overview.htm |access-date=2025-04-23 |website=docs.oracle.com}}

Note that the cost of a fixed asset is its purchase price including import duties, after subtracting any deductible trade discounts and rebates. It also includes the cost of transporting and installing the asset on-site and an estimate of the cost of dismantling and removal once it is no longer needed due to obsolescence or irreparable breakdown.{{Cite web |title=Property, plant and equipment {{!}} ACCA Global |url=https://www.accaglobal.com/gb/en/student/exam-support-resources/fundamentals-exams-study-resources/f7/technical-articles/measure-depreciation1.html |access-date=2025-04-23 |website=www.accaglobal.com}}

The primary objective of a business entity is to be profitable and increase the wealth of its owners. To do so, management must exercise due care and diligence by matching the expenses for a given period with the revenues of the same period. The period of use of revenue generating assets is usually more than a year, i.e. long term. To accurately determine the Net Income (profit) for a period, incremental depreciation of the total value of the asset must be charged against the revenue of the same period. Doing so is necessary for determining Net Revenue.{{Cite web |title=Conceptual Framework for Financial Reporting |url=https://www.ifrs.org/issued-standards/ifrs-standards-framework/}}

Net book value of an asset is the difference between the historical cost of that asset and its associated depreciation. Under most financial accounting standards (Standard Accounting Statement (SAS) 3 and IAS 16), the value of fixed assets are recorded and reported at net book value. Also, carrying assets at net book value is the most meaningful way to capture asset values for the owners of the business and potential investors.{{Cite web |title=Net Book Value |url=https://corporatefinanceinstitute.com/resources/accounting/net-book-value/ |access-date=2025-04-23 |website=Corporate Finance Institute |language=en-US}}

Depreciation is the expense generated by using an asset. It is the wear and tear and thus diminution in the historical value due to usage. It is also the cost of the asset less any salvage value over its estimated useful life. A fixed asset can be depreciated using the straight line method which is the most common form of depreciation. Tax depreciation is commonly calculated differently than depreciation for financial reporting.{{Cite web |title=Depreciation: Definition and Types, With Calculation Examples |url=https://www.investopedia.com/terms/d/depreciation.asp |access-date=2025-04-23 |website=Investopedia |language=en}}{{Cite web |title=Depreciation Methods Template |url=https://corporatefinanceinstitute.com/resources/financial-modeling/depreciation-methods-template/ |access-date=2025-04-23 |website=Corporate Finance Institute |language=en-US}}{{Cite web |last=CEPF® |first=True Tamplin, BSc |title=Depreciation {{!}} Causes, Methods of Calculating, and Examples |url=https://www.financestrategists.com/accounting/depreciation-and-disposal-of-fixed-assets/depreciation/ |access-date=2025-04-23 |website=Finance Strategists |language=en-US}}

Straight-line depreciation is the simplest and most often used method. The straight-line depreciation is calculated by dividing the difference between assets pagal sale cost and its expected salvage value by the number of years for its expected useful life. (The salvage value may be zero, or even negative due to costs required to retire it; however, for depreciation purposes salvage value is not generally calculated at below zero.) The company will then charge the same amount to depreciation each year over that period, until the value shown for the asset has reduced from the original cost to the salvage value.{{Cite web |title=Straight Line Depreciation |url=https://corporatefinanceinstitute.com/resources/accounting/straight-line-depreciation/ |access-date=2025-04-24 |website=Corporate Finance Institute |language=en-US}}{{Cite web |title=Straight Line Depreciation Method {{!}} Explanation & Examples |url=https://accounting-simplified.com/financial/fixed-asset/depreciation-methods/straight-line/ |access-date=2025-04-24 |language=en-us}}

Straight-line method:

: $\backslash mbox\{annual\; depreciation\; expense\}\; =\; \{\backslash mbox\{cost\; of\; fixed\; asset\}\; -\; \backslash mbox\{residual\; value\}\; \backslash over\; \backslash mbox\{useful\; life\; of\; asset\}\; (years)\}$

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• Bentley Infrastructure 500
• Capital asset
• Depreciation
• DIRTI 5
• Fixed asset turnover
• Fixed assets management
• Fixed assets register
• Like-kind exchange
• Revaluation of fixed assets

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Category:Accounting terminology