non-current asset

(noun)

Another term for fixed asset; term used in accounting for assets and property which cannot easily be converted into cash.

Related Terms

Examples of non-current asset in the following topics:

  • Fixed Assets Turnover Ratio

    • Fixed assets, also known as a non-current asset or as property, plant, and equipment (PP&E), is a term used in accounting for assets and property that cannot easily be converted into cash.
    • This can be compared with current assets, such as cash or bank accounts, which are described as liquid assets.
    • Moreover, a fixed/non-current asset also can be defined as an asset not directly sold to a firm's consumers/end-users.
    • Its non-current assets would be the oven used to bake bread, motor vehicles used to transport deliveries, cash registers used to handle cash payments, etc.
    • Each aforementioned non-current asset is not sold directly to consumers.

  • Assets

    • Assets on a balance sheet are classified into current assets and non-current assets.
    • On the left side of a balance sheet, assets will typically be classified into current assets and non-current (long-term) assets.
    • A current asset on the balance sheet is an asset which can either be converted to cash or used to pay current liabilities within 12 months.
    • A non-current asset is a term used in accounting for assets and property which cannot easily be converted into cash.
    • Non-current assets include property, plant and equipment (PPE), investment property (such as real estate held for investment purposes), intangible assets, long-term financial assets, investments accounted for by using the equity method, and biological assets, which are living plants or animals.

  • Noncash Items

    • Fixed assets, also known as a non-current asset or as property, plant, and equipment (PP&E), is an accounting term for assets and property.
    • Unlike current assets such as cash accounts receivable, PP&E are not very liquid.
    • PP&E are often considered fixed assets: they are expected to have relatively long life, and are not easily changed into another asset .
    • Depreciation expense does not require a current outlay of cash, but the cost of acquiring assets does.
    • For example, an asset worth $100,000 in year 1 may have a depreciation expense of $10,000, so it appears as an asset worth $90,000 in year 2.

  • Defining Long-Lived Assets

    • Long-lived assets are those that provide a company with a future economic benefit beyond the current year or operating period.
    • Assets are economic resources.
    • Long-lived assets provide a company with a future economic benefit beyond the current year or operating period.
    • Since non-current, or long-lived, assets are expected to last for longer than one year, accounting treats long-lived assets differently according to their useful life.
    • When assets are expected to contribute to earnings for multiple years, such assets are referred to as long-lived, non-current or long-term assets.

  • Liquidity

    • The current ratio, which is the simplest measure and is calculated by dividing the total current assets by the total current liabilities.
    • A value of over 100% is normal in a non-banking corporation.
    • However, some current assets are more difficult to sell at full value in a hurry.
    • The quick ratio, which is calculated by deducting inventories and prepayments from current assets and then dividing by current liabilities--this gives a measure of the ability to meet current liabilities from assets that can be readily sold.
    • This indicates the ability to service current debt from current income, rather than through asset sales.

  • Involuntary Conversion

    • Unlike a voluntary sale, involuntary conversion of assets can involve an asset exchange for monetary or non-monetary assets .
    • The gain or loss is the difference between the proceeds received and the book value of the asset disposed of, updated for current depreciation expense.
    • Non-monetary assets are not easily converted to cash, such as equipment.
    • An exchange between non-monetary assets should be analyzed to determine if the exchange has commercial substance.
    • For non-monetary asset exchanges without commercial substance, the expectation is that the exchange will not materially alter future cash flows.

  • Total Assets Turnover Ratio

    • Total asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue.
    • Total assets turnover = Net sales revenue / Average total assets
    • Tangible assets contain various subclasses, including current assets and fixed assets.
    • Current assets include inventory, while fixed assets include such items as buildings and equipment.
    • Intangible assets are non-physical resources and rights that have a value to the firm because they give the firm some kind of advantage in the market place.

  • The Capital Account

    • The capital account acts as a sort of miscellaneous account, measuring non-produced and non-financial assets, as well as capital transfers.
    • Instead, the capital account acts as a sort of miscellaneous account, measuring non-produced and non-financial assets, as well as capital transfers.
    • The capital account is normally much smaller than the financial and current accounts.
    • The capital account can be split into two categories: non-produced and non-financial assets, and capital transfers.
    • Non-produced and non-financial assets include things like drilling rights, patents, and trademarks.

  • Basic Components of Asset Valuation

    • Fair value is used in accordance with US GAAP (FAS 157), where fair value is the amount at which the asset could be bought or sold in a current transaction between willing parties, or transferred to an equivalent party, other than in a liquidation sale.
    • However, when a business acquires plant assets in exchange for other non-cash assets (shares of stock, a customer's note, or a tract of land) or as gifts, it is more difficult to establish a cash price.
    • The general rule on non-cash exchanges is to value the non-cash asset received at its fair market value or the fair market value of what was given up, whichever is more clearly evident.
    • The book value of a fixed asset asset is its recorded cost less accumulated depreciation.
    • An old asset's book value is usually not a valid indication of the new asset's fair market value.

  • Terminology of Accounting

    • Two major asset classes are intangible assets and tangible assets.
    • Intangible assets are identifiable non-monetary assets that cannot be seen, touched or physically measured, are created through time and effort, and are identifiable as a separate asset.
    • Tangible assets contain current assets and fixed assets.
    • Current assets include inventory, while fixed assets include such items as buildings and equipment.
    • If liability exceeds assets, negative equity exists.