Non-Current Assets PDF

WHAT IS NON- CURRENT ASSETS? Reported by: Group 2  NON- CURRENT ASSETS Non-current assets, also known as long-term assets, are resources owned by a company that are not expected to be converted into cash or consumed within one year. These assets are typically used for more than one...

WHAT IS NON- CURRENT ASSETS? Reported by: Group 2  NON- CURRENT ASSETS Non-current assets, also known as long-term assets, are resources owned by a company that are not expected to be converted into cash or consumed within one year. These assets are typically used for more than one accounting period, contributing to the operational capacity of the business over time. They can include physical properties such as machinery and buildings, as well as intangible assets like patents or trademarks. IMPORTANCE IN FINANCIAL STAEMENT Non-current assets represent a significant portion of a company’s total assets and play an important role in assessing its financial stability and long-term viability. These assets impact the balance sheet, showcasing a company’s investment in growth and capacity. A proper understanding of non-current assets is crucial for stakeholders making informed decisions about investments. DIFFERENCE BETWEEN CURRENT AND NON- CURRENT  Non-current assets differ from current assets primarily in the duration of their utility and liquidity. Current assets are resources expected to be transformed into cash within one year, such as cash, inventory, and receivables. In contrast, non-current assets are held for longer periods, with values derived from the business's ongoing operations. TYPES OF NON-CURRENT ASSETS Non-current assets are classified into various types, including tangible assets, intangible assets, financial assets, and deferred tax assets. Each type has unique characteristics and implications for businesses.  TANGIBLE ASSETS Tangible assets are physical items that a company can touch or measure, which provide value to the business. This category includes property, plant, and equipment (PP&E), which are critical for operations. Examples include land, buildings, vehicles, and machinery, all of  INTANGIBLE ASSETS Intangible assets are non-physical assets that hold value for a business but cannot be physically touched or measured. This category includes intellectual property such as patents, trademarks, and goodwill, which can significantly affect a company's market value.  FINANCIAL ASSETS Financial assets comprise assets that are not tangible and represent ownership of value. This includes long-term investments, stocks, bonds, and other securities that a company may hold. Such assets are essential for future growth and strategic investments.  DEFERRED TAX ASSETS Deferred tax assets arise when a company has overpaid taxes or has tax credits that can be utilized in future periods. These assets occur due to temporary differences between financial reporting and tax reporting, such as depreciation methods or loss carryforwards. These assets can enhance cash flow by reducing future tax liabilities, thus  TANGIBLE NON CURRENT ASSET  Tangible non-current assets are physical assets that a company owns and uses in its operations. They play a crucial role in the production of goods and services, as well as contributing to the overall value of the organization. Understanding their classifications, such as Property, Plant, and Equipment, Land and Buildings, Machinery and Equipment, and Infrastructure Assets, is vital for assessing a company’s financial health and operational capacity.  PROPERTY, PLANT, AND Property, Plant, and Equipment (PP&E) are EQUIPMENT vital tangible assets that(PP&E) include land, buildings, machinery, and other equipment a company utilizes for its operations. PP&E typically represents a significant percentage of total assets on a balance sheet, indicating the capital investment necessary for the company’s operations.  LAND AND BUILDINGS Land and buildings are essential components of tangible non-current assets categorized under PP&E. Land is not subject to depreciation as it has an indefinite useful life, while buildings are depreciated based on their useful life. The value of land and buildings can appreciate over time, depending on market conditions and development. These assets can also serve as collateral for financing, providing an additional layer of financial  MACHINERY AND EQUIPMENT Machinery and equipment are critical for manufacturing and production processes. These tangible assets are subject to depreciation because their value diminishes over time with usage and technological advancements. Investments in modern machinery can lead to greater efficiency, reduced operational costs, and increased production capacity. Companies often assess their machinery and equipment regularly to ensure they meet industry standards and operational needs without excessive downtime.  INFRASTRUCTURE ASSETS Infrastructure assets include long- lived assets that are integral to a company’s operations, such as roads, bridges, and water systems. They often require significant upfront investment but provide long-term benefits by facilitating efficient operations. Unlike PP&E, infrastructure assets may require unique accounting treatments and may not always fit into traditional depreciation models. Proper management of these assets is crucial for ensuring sustainability and compliance with government regulations.