B3: 3.01 Non-current assets


According to the International Accounting Standards Board, an asset is “…a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity”.

So an asset is something of value that a business owns or controls. It is something:

  • That can be spent, such as money held in a bank account or cash in a till
  • That will be converted over time into money, such as customer debts (i.e. trade receivables)
  • That can be sold, such as inventories
  • That can be used to generate or save money, such as a piece of land rented to another business, or equipment that is used to make goods for sale

Current and non-current assets

Accountants split assets into two broad categories of assets

Current assets

Current assets (such as inventories, trade receivables and cash held at the bank) are short-term in nature and businesses will usually expect to hold these for less than a year.

Non-current assets

Non-current assets (also known as “fixed assets”) are long-term in nature. Businesses expect to hold and use these on a continuing basis and for more than a year.

Examples of non-current assets:

  • Property, plant and equipment – such as land and machinery
  • Investments – such as shares in other companies
  • Intangible assets – such as goodwill, brands, research and development (nb. intangible assets are assets that have no physical presence)

Accounting standards

The International Accounting Standards Board (i.e. the “IASB”) issues accounting standards that provide guidance and instructions as to how types of transactions should be treated as well as how financial statements should be prepared.

Several of the accounting standards provide information as to how the different types of non-current assets should be:

  • Recognised; that is, how we identify that a non-current asset exists and when it came into existence
  • Valued; i.e. how much it should be recorded at when it is first acquired and and then how it should be valued over its lifetime
  • Presented in a set of accounts

This course will look at the main requirements of IAS 16 Property, plant & equipment but students should be aware that there are several other standards dealing with non-current assets including IAS 36 Impairment of Assets, IAS 38 on Intangible Assets and IFRS 15 Leases and these will be covered in other courses.

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