A fixed asset is a physical item an organization buys to use rather than sell, and expects to use for more than one year. In financial statements fixed assets usually appear as property, plant and equipment (PP&E) under non-current assets. "Fixed" does not mean immovable — a laptop or a van is a fixed asset — it means the asset is held for the long term.
What qualifies as a fixed asset
An item is generally treated as a fixed asset when it is:
- Tangible — it physically exists (software and patents are intangible assets, accounted for separately).
- Used in operations — not held for sale to customers.
- Long-lived — expected to provide benefit for more than one accounting period.
- Above the capitalization threshold — cheap items are often expensed even if they last for years (see capitalization threshold).
Examples
| Class | Examples |
|---|---|
| Land and buildings | Offices, warehouses, depots (land is not depreciated) |
| Plant and machinery | Production lines, compressors, generators |
| Vehicles | Cars, vans, forklifts, trucks |
| IT equipment | Laptops, servers, network gear |
| Furniture and fittings | Desks, chairs, shelving |
| Specialist equipment | Medical devices, lab instruments, tools, AV kit |
Fixed assets vs current assets
Current assets — cash, receivables, inventory — are expected to be turned into cash or used up within a year. Fixed assets are kept and used for years. That difference drives the accounting: the cost of a fixed asset is capitalized (recorded on the balance sheet) and then spread over its useful life through depreciation, rather than expensed all at once.
Accounting for a fixed asset
- Recognize at cost — purchase price plus costs to get it ready for use (delivery, installation).
- Depreciate over its useful life using a suitable method, down to its salvage value.
- Review for impairment if its value drops sharply, and revise useful life if estimates change.
- Derecognize on disposal, recording any gain or loss against net book value.
How to identify a fixed asset
Ask four questions about any purchase. If the answer to all four is yes, it is normally a fixed asset:
- Does it physically exist?
- Will we use it to run the organization, rather than sell it?
- Will it be useful for more than a year?
- Is its cost above our capitalization threshold?
Under IAS 16, property, plant and equipment is recognized when it is probable that future economic benefits will flow to the entity and the cost can be measured reliably; US GAAP (ASC 360) takes a similar approach. In the general ledger, each class of fixed asset usually has its own fixed asset account (for example "IT equipment, at cost") with a matching accumulated depreciation account.
Common fixed asset mistakes
- Expensing items that should be capitalized, or the reverse, because there is no written capitalization policy.
- Leaving disposed assets on the register, which overstates the balance sheet and the depreciation charge.
- Keeping finance and physical records apart. If the fixed asset register has no tag numbers or locations, nobody can prove the assets exist.
- Never reviewing useful lives. Estimates should be revisited when an asset is used harder or longer than planned.
A simple way to start is the free fixed asset register template, which includes cost, useful life and depreciation columns. When the spreadsheet outgrows itself, the Asetavo asset register keeps the same fields alongside tags, locations and custodians.
Why the physical side matters
Auditors do not just check the numbers — they check the assets exist. A fixed asset register full of items that were scrapped years ago (ghost assets) overstates the balance sheet and the depreciation charge. Tagging fixed assets and running regular asset audits keeps the financial register honest.
How Asetavo handles fixed assets
Asetavo keeps the fixed asset's cost, in-service date, useful life and salvage value alongside its location, custodian and tags. It supports eight depreciation methods with separate book and tax views, computes schedules as drafts before you post them, tracks NBV, records disposals with gain or loss, and exports valuation and NBV reports to CSV.
