Key Term and Why I am interested In It
I chose Fixed Asset as the key term this week. I recently became employed in a position where I handle fixed asset and leases for a company. Preparing this summary is a great approach for me to expand more knowledge about fixed assets.
Non-current assets, also referred to fixed assets, are assets which have been purchased by firms with the intention of being held or used for a period longer than one year from balance date (Tay 2000). A fixed asset can be tangible or intangible. Tangible assets are items that physically exist whereas intangible assets do not physically exist. Some examples of tangible asset are buildings, land, equipment and machinery. Examples of intangible assets are trademarks, patents, goodwill and software. The value of intangible assets is often calculated solely on the basis of estimates of their future potential (Nussenbaum 2014).
Major Article Summary
Fixed assets are depreciated based on their estimated useful lives and residual values (Tay 2000). Having a fixed management system is beneficial to provide the correct accounting of the assets. A company can revalue their assets by making improvements or repair to the asset. The higher the amount of fixed assets in the asset portfolio of a firm, the more likely it will revalue its assets (Tay 2000). The higher the value in assets, the more liquid cash the firm has in collateral. Depending on the level of liquidity, a firm might decide not to revalue its fixed assets (Tay 2000)
Evaluating the value of assets can be challenging. The fixed asset management system being used will depreciate the value based on the useful economic life. Depreciation of an asset is a deduction from taxable income which benefits the company. There are two main methods for calculating depreciation is straight line and reducing (or declining) balance method. Under straight-line method, the historical cost of the asset is...