You are here - Financial Accounting > Noncurrent Assets

Noncurrent Assets

Search Financial-Accounting.us

Noncurrent assets are long-term assets that are used in the conduct of the business. Whereas current assets are liquid and turn over in relatively short time periods, noncurrent assets usually turn over very slowly, on the order of once in several years. In other words, while the operating cycle for current assets is usually less than a year, the replacement cycle for noncurrent assets is longer than a year. In a high-tech organization, however, some noncurrent assets may be replaced more frequently.

All noncurrent assets are recorded on the balance sheet at their historical acquisition costs. The disadvantage of this is that as time passes the historical costs of many noncurrent assets become out of date relative to their current market values. Consequently, they indicate little about the market value of the organization and about the future resources necessary to replace the assets. However, the historical costs listed on the balance sheet do represent the costs of these assets that will eventually be consumed by future operations.

Recall from the previous chapter that current assets will be converted into cash or used in operations within a year or the firm’s operating cycle, whichever is longer. Noncurrent assets are not expected to be fully consumed within that period; thus, they are long-lived assets.

• Identify three major types of noncurrent assets:
  1. property, plant, and equipment
  2. intangible assets
  3. natural resources
• Explain how to account for the acquisition of these assets.
• Describe the procedures for depreciation, amortization, and depletion.
• List the factors affecting managers’ selection of a depreciation method.
• Determine which postacquisition expenditures should be expensed and which should be capitalized.
• Explain the accounting issues associated with asset write-downs and disposals.
• Interpret financial statement disclosures about noncurrent assets.

Noncurrent Assets Contents

Property, Plant and Equipment (PPE)

• Initial Valuation of Property, plant, and equipment (PPE)
• Depreciation of Property, plant, and equipment (PPE)
  • Straight-Line Method (Depreciation Methods)
  • Sum-of-the-Years’-Digits Method (Depreciation Methods)
  • Declining-Balance (DB) Methods (Depreciation Methods)
  • Tax Depreciation
  • Selection of Depreciation Method
  • Misconceptions About Depreciation
• Expenditures After Acquisition - Property, plant, and equipment (PPE)
• Disposals of Property, plant, and equipment (PPE)
• Write-Downs - Property, plant, and equipment (PPE)
• Financial Statement Presentation of Property, plant, and equipment (PPE)
• Utilization of Property, plant, and equipment (PPE)
• Percentage of PPE Depreciated (Age)
• Evaluation of the Accounting for Property, Plant, and Equipment (PPE)

Intangible Assets

• Acquisition of Intangible Assets
• Amortization of Intangible Assets

Natural Resources

• Depletion of Natural Resources