What Are Non-Current Assets?

Also referred to as fixed assets, non-current assets are various types of assets that cannot be readily converted into cash. Often, an asset of this type is expected to remain in the possession of the owner for at least one full calendar year. This is in contrast to current assets, which are already in the form of cash or could be converted to cash in a short period of time. A non-current asset may be some type of intangible asset, or equipment that is used in the business operation. Assets of this type are not sold as part of normal business operations, although assets of this type may be sold as part of a shutdown or liquidation of a company.

Non-current assets are typically not sold to customers. Instead, assets of this type may be utilized to support the ongoing operation of the business, making it possible for the company to provide goods and services to clientele. For example, kitchen equipment owned by a restaurant would be classed as non-current assets, since the ovens, refrigeration units, and other equipment are assets that allow the business to prepare food that is in turn sold to consumers.

One of the distinguishing characteristics of non-current assets is that they are acquired for use over an extended period of time. There is usually no intent to sell assets of this type, although they may be depreciated over time and eventually replaced when they are no longer usable. Identifying these types of assets is often important to the accounting process, since the schedules used to determine tax liability on these assets is often different from the schedules used for current assets. For this reason, most businesses will follow the guidelines established by national and local revenue agencies in order to determine if a given asset should be classed as non-current or current.

There are many examples of non-current assets held by different types of companies. Computers, servers, and other equipment used in sales or customer service efforts qualify as assets that are non-current. A fleet of taxicabs owned by a cab company is considered necessary equipment for the ongoing operation of the business, making it a non-current asset. Machinery used in producing various types of goods in a factory setting also qualify, as does office furniture or even a cash register in a retail store.

Non-current assets are often subject to depreciation. This is because assets of this type routinely undergo wear and tear as they are used in operating a business. Claiming depreciation on tax returns requires that the owner understand how to properly calculate the depreciation associated with a particular asset, often using formulas supplied by tax agencies. It is not unusual for businesses to hold on to a non-current asset until it is no longer possible to claim depreciation, sell that equipment or other item based on current book value, and purchase a new replacement, making it possible to begin claiming depreciation on that new non-current asset