Last editedAug 20212 min read
If you run a business, you might have multiple assets that you have either created, own, or benefit from. You may even have valuable assets that are not in physical form, but would make a great long-term investment if realised. It’s important to recognise all your assets, including the ones you may think do not generate cash quickly enough. So, what are non current assets? Check out our guide for more information regarding the non current assets definition.
What are non current assets?
Assets are an essential resource for a company to run operations, boost business value, and generate revenue. In finance and accounting, a company’s balance sheet is split into two sections, showcasing both current and non current assets. Non current assets by definition are assets that cannot easily generate cash within the accounting year. The full value of non current assets is usually not realised within the accounting year. Non current assets are also known as long-term investments and they are capitalised rather than expensed, meaning that their cost spreads out over time. An asset can either amortise or depreciate. Non current assets will benefit a company for more than a year.
Non current assets at a glance
On a company’s balance sheet, assets are split into two parts: non current and current. Current assets refer to short-term investments such as inventory or goods that can be sold and accounts receivable. Some examples of non current assets include land and property, natural resources, and intellectual property.
On a balance sheet, non current assets may be listed under any one of the following headings:
Property, plant, and equipment
Investments (if no profits are expected within a year)
There are three different major categories of non current assets: tangible assets, intangible assets, and natural resources. Non current assets will benefit a company for more than a year.
Tangible assets: tangible assets are physical and include land and property, cash, vehicles, and equipment.
Intangible assets: Intangible assets have no physical form, i.e., inventions, brand reputation, customer or mailing lists, and copyrights.
Natural resources: These are naturally occurring resources mined, grown, or extracted from the earth. Some examples of natural resources include oil and gas, minerals, gold, and timber
Non current assets examples
It is very common for a company or business in a capital-intensive industry to have a large percentage of its assets made up of non current assets. Below are some non current assets examples that can offer a company economic value but cannot be liquidated as quickly as current assets.
Long-term investments: an example of a long-term investment is when an investor buys bonds or stocks in the hope that they will provide significant returns over the years.
Property, plant, and equipment (PPE): this type of asset is an integral part of a company’s operations and they’re used for driving your business forward. Some examples of this include machinery, buildings, land, and office furniture.
Goodwill: Goodwill is an intangible asset that is difficult to measure. However, it refers to the reputation of a business and customer loyalty built from good practices, innovation, and development.
Patents: Patents are a type of intellectual property that protects an invention. Nobody can sell, distribute or reproduce an invention that you have patented. The exclusivity and uniqueness of your invention creates value.
Trademarks: trademarks are classified as non current assets because of the economic value they have.
Client and mailing lists: Client and mailing lists are valuable to a company because of the great return on investment you can yield from direct engagement, B2C marketing, and communication. A company’s database of contacts or mailing list could have engaged subscribers who can help increase brand recognition, build trust, and generate revenue. Therefore, client and mailing lists are classed as an asset and would appear in the asset section of a client list.
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