Non Current Assets

Non-current assets, also known as long-term assets, are resources a company holds for more than a year and uses in its operations to generate revenue. These include property, plant, equipment, and intangible assets like patents. In contrast, current assets are short-term resources expected to be converted into cash or used up within a year, such as inventory and accounts receivable. Both types of assets, along with liabilities and Inventory Assets (debts and obligations), are critical components of a company’s balance sheet, which provides a snapshot of its financial health at a given point in time.

What are Non Current Assets?

Non-current assets are long-term resources that a company uses in its operations and expects to hold for more than a year, such as property, equipment, and patents. Unlike liquid assets, which are easily converted to cash, non-current assets are part of a company’s broader asset allocation strategy to support long-term growth and stability.

Formula:

Non-Current Assets = PPE + Intangible Assets + Long-term Investments + Other Long-term Assets

How to calculate Non-current assets

To calculate non-current assets, sum up all the long-term assets a company holds. Here’s a step-by-step guide:

1. Property, Plant, and Equipment (PPE): Add the value of land, buildings, machinery, and equipment.
2. Intangible Assets: Include patents, trademarks, copyrights, and goodwill.
3. Long-term Investments: Sum up investments in stocks, bonds, or other securities intended to be held for more than a year.
4. Other Long-term Assets: Include items like deferred tax assets, long-term receivables, and any other non-current assets not classified above.

Example Calculation:

Suppose a company has the following items:

• Property, Plant, and Equipment: $200,000
• Intangible Assets: $50,000
• Long-term Investments: $100,000
• Other Long-term Assets: $25,000

Calculation:

Non-Current Assets=200,000+50,000+100,000+25,000 = 375,000

The company’s total non-current assets would be $375,000.

Examples of Noncurrent Assets

1. Property: Real estate owned by the company, including land and buildings used for operations or investment.
2. Plant: Factories and production facilities where goods are manufactured.
3. Equipment: Machinery and tools used in the production process or for providing services.
4. Vehicles: Company-owned cars, trucks, and other transportation used for business purposes.
5. Furniture: Desks, chairs, and other office furnishings.
6. Fixtures: Permanent installations such as lighting and plumbing.
7. Computers: Hardware used for business operations.
8. Software: Purchased software programs used for business processes.
9. Patents: Exclusive rights granted for inventions, allowing the company to produce or sell a product.
10. Trademarks: Registered signs, designs, or expressions identifying products or services.
11. Copyrights: Legal rights to creative works such as literature, music, and art.
12. Franchise Agreements: Rights acquired to operate under a franchisor’s business model and brand.
13. Goodwill: Intangible asset arising from the acquisition of one company by another, representing the value of the acquired company’s reputation and customer relationships.
14. Long-term Investments: Investments in stocks, bonds, or other securities intended to be held for more than a year.
15. Land Improvements: Enhancements to land such as landscaping, fencing, and parking lots.
16. Leasehold Improvements: Alterations made to leased property to meet the needs of the business.
17. Mineral Rights: Rights to extract minerals from the land.
18. Timberland: Land used for growing and harvesting timber.
19. Oil and Gas Reserves: Rights to extract oil and gas.
20. Art Collections: Valuable works of art owned by the company for display or investment.
21. Licenses: Permits acquired to conduct certain types of business or use certain technologies.
22. Development Costs: Costs associated with developing new products or services.
23. Biological Assets: Livestock or crops that are used in agricultural production.
24. Shipping Containers: Containers used for transporting goods over long distances.
25. Infrastructure: Long-term physical structures such as bridges, roads, and utilities that support the company’s operations.

Types of Noncurrent Assets

Tangible Assets: Property (land and buildings), plant (factories), equipment (machinery and tools), vehicles (cars and trucks), furniture and fixtures (office furnishings and installations), computers and hardware (IT assets).

Intangible Assets: Patents (legal rights for inventions), trademarks (registered signs/designs), copyrights (rights to creative works), franchise agreements (rights to operate under a franchisor’s model), goodwill (intangible asset from acquisitions), licenses (permits for business activities or technology use).

Financial Assets: Long-term investments (stocks, bonds, securities held for over a year), securities (financial instruments intended for long-term holding).

Natural Resources: Mineral rights (rights to extract minerals), timberland (land for growing/harvesting timber), oil and gas reserves (rights to extract oil and gas).

Development and Capital Projects: Construction in progress (costs of new buildings/facilities), development costs (expenses for new products/services).

Agricultural Assets: Biological assets (livestock or crops used in agricultural production).

Specialized Assets: Art collections (valuable art for display/investment), infrastructure (long-term structures like bridges, roads, utilities).

Non-Current vs. Current Assets

Aspect	Non-Current Assets	Current Assets
Definition	Long-term resources held for more than a year	Short-term resources expected to be used or converted to cash within a year
Examples	Property, plant, equipment, patents, goodwill	Cash, accounts receivable, inventory, prepaid expenses
Purpose	Support long-term business operations and growth	Facilitate day-to-day operations and liquidity
Liquidity	Low (not easily converted to cash)	High (easily convertible to cash)
Depreciation/Amortization	Subject to depreciation or amortization	Not subject to depreciation
Balance Sheet Impact	Reflected as long-term assets	Reflected as short-term assets