What is a non-current asset? (Meaning, Types, Calculation & More)

What are the non-current assets?

Non-current assets are also termed long-term assets. It's an asset that the company invest, hold or acquire for the long term. These types of assets last for the long term and cannot be easily liquidated into cash. The company generates this type of assets for economic benefits of more than one year.

Some examples of non-current assets are property, plant and equipment, Goodwill, long term investment, long term loans and advances.

Non-current assets are also known as a fixed asset but all non-current assets are not fixed assets whereas all fixed assets or non-current assets.

Types of non-current assets.

There are three types of non-current assets tangible assets, intangible assets, and natural resources.

Types of Non-Current Assets

Tangible assets

Tangible assets refer to those assets which have a physical existence and can be seen or touched. These assets can be converted into cash easily, for defining the value we can go to the market to check the current value of the asset. Tangible assets are the most common assets and important asset in a company. For example; plant & machinery, vehicles, building, investment and furniture & fixtures.

Intangible assets

Intangible assets are those assets that do not have any physical existence but has value. These type of assets can be found in big companies, for example:- Goodwill, patent, copyright, software. There are two types of intangible assets identifiable and unidentifiable intangible asset. Identifiable intangible assets are those assets that can be separated from the company and can be sold separately like, Patent, copyright, software, etc. Unidentifiable assets are those assets that cannot be separated from companies and cant be sold separately, most common unidentifiable assets are goodwill.

Natural resources

Natural resources are those assets that occur naturally from Earth. Natural resources are also called wasting assets because they are used up when consumed are consumed. Some examples of natural resources include timber, fossil fuels, oil field, and minerals.

Natural assets are recorded on the balance sheet at the cost of acquisition plus exploration and development cost and less accumulated depletion.

Natural resources valuation = Cost of acquisition on + Exploration & Development cost - Accumulated depletion

Important points about non-current assets

1. Investment always labelled as non-current assets only if the total expected return is not expected within the next 12 months of the balance sheet.

2. Property, plant, land & building, and machinery including vehicles are fixed asset.

3. Intangible assets are goods that have no physical presence.

4. Intangible assets may also arise from the sale or purchase of a business unit.

5. Non-current assets are also known as long term assets.

Calculation of non-current asset

Non-current assets include land & building, plant & machinery, tools, motor vehicles, and other equipment.

Non-current assets are usually valued by deducting the accumulated depreciation from the original purchase cost, except land, the land is not depreciated because that is assumed to have an unlimited useful life other long-lived assets have limited useful life. Therefore the cost of those assets must be allocated to those limited accounting periods. Since land life is not limited there is no need to allocate the cost of land to any accounting period.

For now, that's all about non-current assets for more you can comment below or mail at balancesheetmaker@gmail.com. Thank you for taking your time we will love your feedback.

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