What is Fixed Asset? Definition of Fixed Asset, Fixed Asset Meaning
The fixed assets are the goods and rights acquired, or manufactured, by the company. These are destined, in a lasting way, to the main activity of the company, which is why it is the most important item of non-current assets.
Fixed assets can be composed of both assets acquired by the company (machinery or land for example), and manufactured by the same (patents or software, for example).
Characteristics of fixed assets
Among the characteristics of fixed assets, the following should be highlighted:
- Stays permanently in the company : This means that their presence in the company is at least more than one year.
- In principle, it is not intended to be sold : As for example, it is the case with merchandise. Even so, exceptionally some element of the fixed assets may be disposed of.
Classification of fixed assets
Fixed assets can be divided into two large groups, depending on whether they have a physical appearance or not:
- Inmobilized material
- Intangible assets
Next, we go on to develop each of the previous concepts.
Property, plant and equipment is defined as those elements of the asset that are tangible and are represented by movable or immovable property, except those that must be classified as real estate investments, according to the Spanish General Accounting Plan. The Plan itself establishes the following classification of items of property, plant and equipment:
- Terrens and natural goods.
- Technical facilities.
- Other facilities.
- Information processing equipment.
- Transportation elements.
- Other tangible fixed assets.
This classification, which is an open and non-exclusive list, is found within subgroup 21 of the chart of accounts of the General Accounting Plan.
Property, plant and equipment include the assets with the highest valuation, mainly due to the presence of land and buildings.
Intangible assets are made up of non-monetary assets with no physical appearance, provided they are capable of economic valuation. As with property, plant and equipment, the General Accounting Plan establishes a classification of elements of intangible assets:
- Administrative concessions.
- Industrial property.
- Transfer rights.
- Computer applications.
- Advances for intangible assets.
In addition to the above, the opening of new intangible assets accounts is allowed if there is an intangible asset that meets the requirements to be considered an intangible asset.
Amortization, depreciation and impairment of fixed assets
Over time, fixed assets, both material and intangible, lose value. There are a series of accounting figures to reflect these losses in value:
- The amortization and depreciation: They reflect the loss of value by the habitual use of fixed assets.
- Impairment of value : Reflects the loss of value for reasons other than the normal use of fixed assets. Unlike amortization and depreciation, this impairment can be reversed in the future. This figure is not exclusive to the immobilized; There are also impairments in the value of inventories or merchandise.