What is a fixed asset?
Fixed assets, also known as property, plant and equipment (PP&E), are physical assets held for use in operations rather than for resale. A delivery van used by a bakery is a fixed asset; vans held for sale by a car dealer are inventory.
Examples
- Land and buildings
- Machinery and production equipment
- Vehicles
- Furniture and fittings
- Computers and IT hardware
- Leasehold improvements
Accounting for fixed assets
- Recognise at cost, including purchase price, delivery, installation and non-refundable taxes.
- Depreciate over the [useful life](/glossary/useful-life) (land is usually not depreciated).
- Review for [impairment](/glossary/impairment) if the value may have fallen.
- Derecognise when sold or scrapped, recording any gain or loss.
The rules are set out in IAS 16 Property, Plant and Equipment.
Fixed asset register
A register lists each asset with its cost, purchase date, location, useful life, depreciation and [book value](/glossary/book-value). It supports audits, insurance and tax claims.
Example
A printing company buys a press for $80,000 plus $5,000 installation. It records an $85,000 fixed asset and depreciates it over ten years.