Noncurrent assets describe a company’s 澳洲幸运5官方开奖结果体彩网:long-term investments/assets, such as 澳洲幸运5官方开奖结果体彩网:real estate property holdings, manufacturing plants, and equipment. These items have useful lives that minimally span one year, and are often highly illiquid, meaning they cannot easily be converted into cash. Noncurrent assets are the opposite of 澳洲幸运5官方开奖结果体彩网:current assets like inventory and 澳洲幸运5官方开奖结果体彩网:accounts receivables.

Examples of Noncurrent Assets

Noncurrent assets such as 澳洲幸运5官方开奖结果体彩网:real estate properties and manufacturing plants are tangible or fixed physical assets that cannot be easily 澳洲幸运5官方开奖结果体彩网:liquidated. This is especially true with commercial real estate, where it typically takes longer than a fiscal year to close on the sale of a property. But noncurrent assets may likewise include intangible items, such as 澳洲幸运5官方开奖结果体彩网:intellectual properties like design patents. Such items' useful lives typically exceed one fiscal year and are unlikely to be liquidated within that time frame. Instead, patents take an 澳洲幸运5官方开奖结果体彩网:amortization approa🧜ch, where the🐷ir costs are spread out over their useful lives, which can span many years—even decades.

Noncurrent Assets and Depreciation

Like amortization, 澳洲幸运5官方开奖结果体彩网:depreciation is an 澳洲幸运5官方开奖结果体彩网:accounting method where the cost of a 澳洲幸运5官方开奖结果体彩网:tangible asset is likewise spread out over the course of its 澳洲幸运5官方开奖结果体彩网:useful life. For this reason, a rule created by the 澳洲幸运5官方开奖结果体彩网:Inꦬternational Accounting Standards Board mandates that the depreciation of a noncurrent asset must be itemized as an expense on a company's financial statements. As an ancillary effect, depreciation helps companies budget their resources so that they don't have to a shell out a lump-sum of cash when they first purcha🐷💦se big-ticket items.

Noncurrent assets can be depreciated using the straight-line depreciation method, which subtracts the asset's 澳洲幸运5官方开奖结果体彩网:salvage value from its 澳洲幸运5官方开奖结果体彩网:cost basis and divides it by the total number of years in its useful life. Thus, the depreciation expense under the 澳洲幸运5官方开奖结果体彩网:straight-line basis is𝄹 e🌳ffectively the same for every year it is used.

Depreciation Example

Let’s consider an automobile manufacturer who purchases a machine that produces doors for its cars. The cost basis of this machine is $5 million, and the machine's expected useful life is 15 years, after which time, the company anticipates selling that machine for $500,000. Under this scenario, the depreciation expense for the machine is $300,000 ($5 million - $500,000/15) per year. So at the end of the asset's useful life, the machine will be accounted for using its salvage value of $500,000.