Noncurrent assets

Definition

Noncurrent assets are long-term investments or property that a company holds for more than one year. They are not expected to be converted into cash within the business's operating cycle.

5 Must Know Facts For Your Next Test

1. Noncurrent assets include items like property, plant, and equipment (PP&E), intangible assets, and long-term investments.
2. These assets are reported on the balance sheet at their historical cost minus accumulated depreciation or amortization.
3. Noncurrent assets are crucial for understanding a company's long-term financial stability and operational capacity.
4. Impairment of noncurrent assets can affect a company's financial statements by reducing the book value of these assets.
5. The classification of an asset as noncurrent helps separate it from current assets, which are expected to be liquidated within one year.

Review Questions

• What types of items are typically classified as noncurrent assets?
• How are noncurrent assets reported on the balance sheet?
• Why is it important to distinguish between current and noncurrent assets?

Related terms

Current Assets:

Assets expected to be converted into cash or used up within one year or one operating cycle.

Depreciation:

The process of allocating the cost of tangible fixed assets over its useful life.

Intangible Assets:

Non-physical assets such as patents, trademarks, and goodwill that have value but do not have a physical presence.