Non-Current Assets
Financials
Industry:
Sector Agnostic
Short Definition
Non-Current Assets are long-term assets expected to provide economic benefits beyond one year or one operating cycle, whichever is longer. They include tangible assets (e.g., property, plant, equipment), intangible assets (e.g., goodwill, patents), and long-term investments, supporting sustained business operations.
Short Definition
Non-Current Assets are long-term assets expected to provide economic benefits beyond one year or one operating cycle, whichever is longer. They include tangible assets (e.g., property, plant, equipment), intangible assets (e.g., goodwill, patents), and long-term investments, supporting sustained business operations.
Short Definition
Non-Current Assets are long-term assets expected to provide economic benefits beyond one year or one operating cycle, whichever is longer. They include tangible assets (e.g., property, plant, equipment), intangible assets (e.g., goodwill, patents), and long-term investments, supporting sustained business operations.
Why it matters for Investors
Long-term value: Reflects the company’s investment in assets driving future growth. Significant growth in non‑current assets can indicate strategic investment (e.g., expansion, acquisitions, R&D) — or potential over‑spending on assets with slow payback.
Financing insight: High non‑current assets relative to total assets can signal a capital‑intensive business model (e.g., manufacturing, infrastructure) — critical for investors comparing asset‑light vs. asset‑heavy models.
Depreciation impact: Indicates how asset value erosion affects profitability.
Capital intensity signal: High non-current assets suggest capital-intensive operations, impacting cash flow.
Why it matters for Investors
Long-term value: Reflects the company’s investment in assets driving future growth. Significant growth in non‑current assets can indicate strategic investment (e.g., expansion, acquisitions, R&D) — or potential over‑spending on assets with slow payback.
Financing insight: High non‑current assets relative to total assets can signal a capital‑intensive business model (e.g., manufacturing, infrastructure) — critical for investors comparing asset‑light vs. asset‑heavy models.
Depreciation impact: Indicates how asset value erosion affects profitability.
Capital intensity signal: High non-current assets suggest capital-intensive operations, impacting cash flow.
Why it matters for Investors
Long-term value: Reflects the company’s investment in assets driving future growth. Significant growth in non‑current assets can indicate strategic investment (e.g., expansion, acquisitions, R&D) — or potential over‑spending on assets with slow payback.
Financing insight: High non‑current assets relative to total assets can signal a capital‑intensive business model (e.g., manufacturing, infrastructure) — critical for investors comparing asset‑light vs. asset‑heavy models.
Depreciation impact: Indicates how asset value erosion affects profitability.
Capital intensity signal: High non-current assets suggest capital-intensive operations, impacting cash flow.
Formula
Practical considerations:
Depreciation & Amortization: Record Plant, Property & Equipment (PP&E) and intangible assets at cost and reduce their carrying value over time through depreciation or amortization. Depreciation and Amortization are ways of spreading the cost of long‑term assets over the time they’re used — instead of expensing the full amount upfront.
Depreciation applies to tangible assets like buildings, vehicles, or equipment. Example: a $100,000 machine with a 5‑year life might record $20,000 depreciation each year.
Amortization applies to intangible assets like patents, software, or trademarks — the same idea, just for non‑physical assets.
Impairment: Test periodically for impairment — if market value falls below book value, record a write‑down. Impairment means checking if an asset has lost value. If its current market value is lower than what’s on the books, the company must write it down to reflect that loss.
Capital vs. Expense: Only costs providing future benefit should be capitalized here; routine maintenance or operating costs go directly to the income statement.
Capitalizing means recording a cost as an asset because it will benefit the company for several years (like buying equipment or building software).
Expensing means recording it as a cost right away because it’s a short‑term item (like repairs or utilities).
Revaluation: Under IFRS accounting standards, revaluation of fixed assets may be allowed; under US GAAP, assets usually remain at historical cost. Revaluation means — under IFRS, companies can update certain assets to current fair value on the balance sheet. Under US GAAP, assets usually stay at their original purchase cost minus depreciation, not adjusted for market changes.
Liquidity: Unlike current assets, these are not easily convertible to cash. Too high a proportion can constrain flexibility during downturns.
Formula
Practical considerations:
Depreciation & Amortization: Record Plant, Property & Equipment (PP&E) and intangible assets at cost and reduce their carrying value over time through depreciation or amortization. Depreciation and Amortization are ways of spreading the cost of long‑term assets over the time they’re used — instead of expensing the full amount upfront.
Depreciation applies to tangible assets like buildings, vehicles, or equipment. Example: a $100,000 machine with a 5‑year life might record $20,000 depreciation each year.
Amortization applies to intangible assets like patents, software, or trademarks — the same idea, just for non‑physical assets.
Impairment: Test periodically for impairment — if market value falls below book value, record a write‑down. Impairment means checking if an asset has lost value. If its current market value is lower than what’s on the books, the company must write it down to reflect that loss.
Capital vs. Expense: Only costs providing future benefit should be capitalized here; routine maintenance or operating costs go directly to the income statement.
Capitalizing means recording a cost as an asset because it will benefit the company for several years (like buying equipment or building software).
Expensing means recording it as a cost right away because it’s a short‑term item (like repairs or utilities).
Revaluation: Under IFRS accounting standards, revaluation of fixed assets may be allowed; under US GAAP, assets usually remain at historical cost. Revaluation means — under IFRS, companies can update certain assets to current fair value on the balance sheet. Under US GAAP, assets usually stay at their original purchase cost minus depreciation, not adjusted for market changes.
Liquidity: Unlike current assets, these are not easily convertible to cash. Too high a proportion can constrain flexibility during downturns.
Formula
Practical considerations:
Depreciation & Amortization: Record Plant, Property & Equipment (PP&E) and intangible assets at cost and reduce their carrying value over time through depreciation or amortization. Depreciation and Amortization are ways of spreading the cost of long‑term assets over the time they’re used — instead of expensing the full amount upfront.
Depreciation applies to tangible assets like buildings, vehicles, or equipment. Example: a $100,000 machine with a 5‑year life might record $20,000 depreciation each year.
Amortization applies to intangible assets like patents, software, or trademarks — the same idea, just for non‑physical assets.
Impairment: Test periodically for impairment — if market value falls below book value, record a write‑down. Impairment means checking if an asset has lost value. If its current market value is lower than what’s on the books, the company must write it down to reflect that loss.
Capital vs. Expense: Only costs providing future benefit should be capitalized here; routine maintenance or operating costs go directly to the income statement.
Capitalizing means recording a cost as an asset because it will benefit the company for several years (like buying equipment or building software).
Expensing means recording it as a cost right away because it’s a short‑term item (like repairs or utilities).
Revaluation: Under IFRS accounting standards, revaluation of fixed assets may be allowed; under US GAAP, assets usually remain at historical cost. Revaluation means — under IFRS, companies can update certain assets to current fair value on the balance sheet. Under US GAAP, assets usually stay at their original purchase cost minus depreciation, not adjusted for market changes.
Liquidity: Unlike current assets, these are not easily convertible to cash. Too high a proportion can constrain flexibility during downturns.
Worked Example
Line Item | Amount | Notes |
|---|---|---|
Property, Plant & Equipment (Net) | $20,000,000 | After $5M accumulated depreciation — reflects ongoing capital investment in facilities and equipment |
Intangible Assets | $3,000,000 | Includes $1M goodwill from prior acquisition and internally developed software valued at cost less amortization |
Long-Term Investments | $5,000,000 | Equity stakes and bonds held longer than 12 months for strategic or yield purposes |
Deferred Tax Assets | $1,000,000 | Future tax credits expected to reduce long-term tax liability |
Other Non-Current Assets | $500,000 | Long-term security deposits and prepayments not expected to be realized within a year |
Total Non-Current Assets | $29,500,000 | Represents all long-term resources supporting future operations and growth |
Notes:
Scale insight: The company holds $29.5M in long‑term assets, signaling a capital‑intensive balance sheet profile — meaningful for investors assessing reinvestment needs and return on capital.
Asset mix: Tangible assets form the bulk (≈68%), while intangibles and strategic investments (≈27%) show a blend of physical and intellectual capital — typical of mature or scaling businesses.
Quality of assets: The presence of goodwill implies prior acquisitions; investors should monitor for impairment risk if performance lags expectations.
Tax efficiency: Deferred tax assets add value by improving future cash flows and lowering effective tax rates.
Liquidity implication: Only ~5% of these assets (long‑term deposits) are convertible in the near term — underscoring that most resources are tied up in fixed or strategic assets, not easily liquidated.
Worked Example
Line Item | Amount | Notes |
|---|---|---|
Property, Plant & Equipment (Net) | $20,000,000 | After $5M accumulated depreciation — reflects ongoing capital investment in facilities and equipment |
Intangible Assets | $3,000,000 | Includes $1M goodwill from prior acquisition and internally developed software valued at cost less amortization |
Long-Term Investments | $5,000,000 | Equity stakes and bonds held longer than 12 months for strategic or yield purposes |
Deferred Tax Assets | $1,000,000 | Future tax credits expected to reduce long-term tax liability |
Other Non-Current Assets | $500,000 | Long-term security deposits and prepayments not expected to be realized within a year |
Total Non-Current Assets | $29,500,000 | Represents all long-term resources supporting future operations and growth |
Notes:
Scale insight: The company holds $29.5M in long‑term assets, signaling a capital‑intensive balance sheet profile — meaningful for investors assessing reinvestment needs and return on capital.
Asset mix: Tangible assets form the bulk (≈68%), while intangibles and strategic investments (≈27%) show a blend of physical and intellectual capital — typical of mature or scaling businesses.
Quality of assets: The presence of goodwill implies prior acquisitions; investors should monitor for impairment risk if performance lags expectations.
Tax efficiency: Deferred tax assets add value by improving future cash flows and lowering effective tax rates.
Liquidity implication: Only ~5% of these assets (long‑term deposits) are convertible in the near term — underscoring that most resources are tied up in fixed or strategic assets, not easily liquidated.
Worked Example
Line Item | Amount | Notes |
|---|---|---|
Property, Plant & Equipment (Net) | $20,000,000 | After $5M accumulated depreciation — reflects ongoing capital investment in facilities and equipment |
Intangible Assets | $3,000,000 | Includes $1M goodwill from prior acquisition and internally developed software valued at cost less amortization |
Long-Term Investments | $5,000,000 | Equity stakes and bonds held longer than 12 months for strategic or yield purposes |
Deferred Tax Assets | $1,000,000 | Future tax credits expected to reduce long-term tax liability |
Other Non-Current Assets | $500,000 | Long-term security deposits and prepayments not expected to be realized within a year |
Total Non-Current Assets | $29,500,000 | Represents all long-term resources supporting future operations and growth |
Notes:
Scale insight: The company holds $29.5M in long‑term assets, signaling a capital‑intensive balance sheet profile — meaningful for investors assessing reinvestment needs and return on capital.
Asset mix: Tangible assets form the bulk (≈68%), while intangibles and strategic investments (≈27%) show a blend of physical and intellectual capital — typical of mature or scaling businesses.
Quality of assets: The presence of goodwill implies prior acquisitions; investors should monitor for impairment risk if performance lags expectations.
Tax efficiency: Deferred tax assets add value by improving future cash flows and lowering effective tax rates.
Liquidity implication: Only ~5% of these assets (long‑term deposits) are convertible in the near term — underscoring that most resources are tied up in fixed or strategic assets, not easily liquidated.
Best Practices
Track composition: Split between tangible (PP&E), intangible (IP, software, goodwill), and financial investments for clearer insight.
Monitor CapEx trend: Rising non‑current assets should correlate with higher production capacity or efficiency gains — if not, question ROI.
Link to Cash Flow: Ensure increases align with cash outflows in investing activities (CapEx or acquisitions).
Efficiency checks: Use ratios like Revenue / Non‑Current Asset or ROA (Return on Assets) to measure productivity of asset deployment.
Asset‑light strategy: Startups can stay agile and extend runway by minimizing heavy fixed asset investments (SaaS, outsourcing, or cloud models).
Best Practices
Track composition: Split between tangible (PP&E), intangible (IP, software, goodwill), and financial investments for clearer insight.
Monitor CapEx trend: Rising non‑current assets should correlate with higher production capacity or efficiency gains — if not, question ROI.
Link to Cash Flow: Ensure increases align with cash outflows in investing activities (CapEx or acquisitions).
Efficiency checks: Use ratios like Revenue / Non‑Current Asset or ROA (Return on Assets) to measure productivity of asset deployment.
Asset‑light strategy: Startups can stay agile and extend runway by minimizing heavy fixed asset investments (SaaS, outsourcing, or cloud models).
Best Practices
Track composition: Split between tangible (PP&E), intangible (IP, software, goodwill), and financial investments for clearer insight.
Monitor CapEx trend: Rising non‑current assets should correlate with higher production capacity or efficiency gains — if not, question ROI.
Link to Cash Flow: Ensure increases align with cash outflows in investing activities (CapEx or acquisitions).
Efficiency checks: Use ratios like Revenue / Non‑Current Asset or ROA (Return on Assets) to measure productivity of asset deployment.
Asset‑light strategy: Startups can stay agile and extend runway by minimizing heavy fixed asset investments (SaaS, outsourcing, or cloud models).
FAQs
What counts as a non‑current asset?
Anything expected to provide benefit beyond 12 months: buildings, machinery, software, trademarks, long‑term investments, and goodwill.Are leased assets included?
Under accounting standards (ASC 842 / IFRS 16), right‑of‑use assets from long‑term leases are recognized as non‑current assets on the balance sheet.How do non‑current assets affect valuation?
They influence book value, depreciation expense, and future profit potential. Asset write‑downs can erode equity and signal declining asset quality.Can non‑current assets decrease?
Yes — through depreciation, impairment, asset sales, or reclassification to current assets when they near disposal.Why are intangibles important for modern startups?
Intellectual property, software, and brand value often dominate the long‑term value of digital and SaaS businesses, even though they aren’t physical assets.
FAQs
What counts as a non‑current asset?
Anything expected to provide benefit beyond 12 months: buildings, machinery, software, trademarks, long‑term investments, and goodwill.Are leased assets included?
Under accounting standards (ASC 842 / IFRS 16), right‑of‑use assets from long‑term leases are recognized as non‑current assets on the balance sheet.How do non‑current assets affect valuation?
They influence book value, depreciation expense, and future profit potential. Asset write‑downs can erode equity and signal declining asset quality.Can non‑current assets decrease?
Yes — through depreciation, impairment, asset sales, or reclassification to current assets when they near disposal.Why are intangibles important for modern startups?
Intellectual property, software, and brand value often dominate the long‑term value of digital and SaaS businesses, even though they aren’t physical assets.
FAQs
What counts as a non‑current asset?
Anything expected to provide benefit beyond 12 months: buildings, machinery, software, trademarks, long‑term investments, and goodwill.Are leased assets included?
Under accounting standards (ASC 842 / IFRS 16), right‑of‑use assets from long‑term leases are recognized as non‑current assets on the balance sheet.How do non‑current assets affect valuation?
They influence book value, depreciation expense, and future profit potential. Asset write‑downs can erode equity and signal declining asset quality.Can non‑current assets decrease?
Yes — through depreciation, impairment, asset sales, or reclassification to current assets when they near disposal.Why are intangibles important for modern startups?
Intellectual property, software, and brand value often dominate the long‑term value of digital and SaaS businesses, even though they aren’t physical assets.
Related Metrics
Commonly mistaken for:
Fixed Assets (Often a subset (Plant, Property & Equipment), not the full non-current category)
Current Assets (short‑term liquidity)
Total Assets (sum of current + non‑current)
Related Metrics
Commonly mistaken for:
Fixed Assets (Often a subset (Plant, Property & Equipment), not the full non-current category)
Current Assets (short‑term liquidity)
Total Assets (sum of current + non‑current)
Related Metrics
Commonly mistaken for:
Fixed Assets (Often a subset (Plant, Property & Equipment), not the full non-current category)
Current Assets (short‑term liquidity)
Total Assets (sum of current + non‑current)
Source of:
Index