The non-current asset or fixed asset of a company consists of all the assets of the company that are not made effective in a period greater than one year.
In simpler words, the non-current asset is composed of those assets that have a useful life of more than one year. It is a part of the asset , within the balance sheet of a company.
Characteristics of non-current assets
Non-current assets are durable and not very liquid, because it takes time to convert them into cash. They are an important element in the economic structure of the company, but since they are long-term investments, they do not serve to obtain liquidity (money) for the company in the short term. These are resources that serve the business in the long term, such as a store, a van, computers, a patent, etc.
The idea is to keep them in the company for a long period of time. For example, the machinery used in the manufacture of furniture or an industrial building suffer little wear and have a very long service life. Keep in mind that although they are durable they are not eternal.
It is important to note that the value of an asset in the accounting books is the purchase price, including the purchase costs and discounting the annual amortization of that asset. Depending on the type of assets that a company has in its non-current assets, we can guess what activity it does.
Classification of non-current assets
Within non-current assets we have:
- Long-term financial investments:For example the acquisition of long-term fixed-income securities , shares and capital contributions.
- Elements of the assets:Includes real estate, furniture and equipment goods, equipment, machinery, land, intangibles , etc. The properties form the non-current asset except if it is a real estate company, which is dedicated to buying and selling real estate. In that case, they would be current assets.
- Intangible assets:Those that cannot be quantified physically but that produce or can produce benefits for the company. For example, the rights to use industrial or intellectual property, or a patent.