Non-current asset

IFRS Definition of non-current asset: An asset that does not meet the definition of a current asset. AKA – Fixed assets


Or…….

Assets

An asset is something which has an economic value and held by an organization for benefit in present and future. Assets are broadly classified into two categories based on the time period within which they are expected to be converted into cash or used in the business:

  • Current Assets: Assets which are likely to be converted into cash or used up within one year are classified under this category. In other words, such assets are converted back into cash within one year period. These Assets reveal information about the operating activities of a company. Examples: Cash, Inventory, Prepaid Expenses, Accounts Receivables, Marketable Securities, Other Current Assets etcetera
  • Non-Current Assets: Such Assets are not owned (or leased) for the purpose of converting them into cash within a year. Non-Current Assets are basically long-term assets having bought with the intention of using them in the business and their benefits are likely to accrue for a number of years. These Assets reveal information about the investing activities of a company. Non-Current Asset can be either Tangible or Intangible. Examples: Fixed Assets such as Property, Plant, Equipment, Land & Building, Long-term Investment in Bonds and Stocks, Goodwill, Patents, Trademark etcetera

Non-current assets

A non-current asset is an asset that is not expected to turn to cash within one year of date shown on a company’s balance sheet (otherwise this would assume that the company has an operating cycle of less than one year i.e is in liquidation).

A non-current asset is also known as a long-term asset. Non-current assets are reported under the following balance sheet headings:


Disclosures:

IFRS

IFRS requirements

Additional explanation

IAS 1 56

Deferred tax assets must not be presented as current.

Refer to deferred tax assets for a complete explanation. In short:

  • The carrying amount of deferred tax assets are reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to recover the asset
  • In many countries, they expire after 20 years.
  • Tax rates affect the value of deferred tax assets

IAS 1 60

Presentation of line items on a:

  • Current and non-current basis
  • Liquidity basis (subject to criteria and additional requirements).

Whether you are a small or large business bills have to be paid on a regular basis. This distinction is the basis for liquidity ratios, used internally and externally, see https://www.investopedia.com/terms/l/liquidityratios.asp

In general all users want to know how quickly or slowly the assets on the balance sheet can be transformed to cash (‘Cash is King’)

IAS 1 61

Disclosure of items expected to be recovered or settled within and after 12 months of reporting date.

Part of non-current asset may recover or settle within the year, so although non-current in nature a disclosure of the current portion can either be made by reclassifying the current part to current assets or disclose in the notes to non-current assets the current part.

 

Investment property

 

IAS 40 7, IAS 40 8

Classification of assets subject to lessor leases (rentals) by their nature (i.e. Investment property).

The characteristics of investment property differ sufficiently from Property, plant and equipment and owner-occupied property that there is a need for a separate standard. Especially the fair value measurement is a significant issue in such financial statements.

 

Right-to-use asset

 

IFRS 16 22

At the start of an (operational or financial) lease, the lessee shall recognise a right-to-use asset and a lease liability.

All leases (including rentals) are nowadays capitalised which should increase comparability between owners and lessees. A separate class has been made because leases can vary in respect of ownership (as a result of which all lease and rentals are capitalised), avoiding new lease contract definition trying to avoid capitalisation.

IFRS 5 38, IFRS 5 40

Specific line items required for assets held for sale and assets in disposal groups held for sale.

These are not part of current or non-current assets, but a category in-between them, based on the disclosures regarding such assets each user can make up their own mind whether he/she expects these assets to be transferred to cash within or outside the 12 month period.

 

Property plant and equipment

 

IAS 16 73(d)

Opening and closing balance PPE

cost or fair value1, accumulated depreciation and impairment, and carrying value

Disclose for each class of property, plant and equipment the opening and closing balances of:

IAS 16 73(e)

Movement schedule

Disclose a reconciliation of the opening and closing balances of the carrying amount for each class of property, plant and equipment.

IAS 16 73(e) sub (i) – (ix) detail specific reconciling items to be included (for example additions, depreciation, impairment)

IAS 16 74(a)

Restrictions or pledges

Disclose items that have restrictions on title or a pledged as security for
liabilities.

IAS 16 74(b)

Additions under construction (as a separate class – Assets under construction)

Disclose expenditures recognised during the course of construction.

IAS 16 74(c)

Contracts committed

Disclose any contractual commitments for the acquisition of property, plant
and equipment.

IAS 38 126

Borrowing costs capitalisation

Disclose borrowing costs capitalised during the period.

Non-current asset

Non-current asset

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