A long-term asset, also known as a noncurrent asset, is an item that a company or individual owns or controls that is expected to generate economic benefit over an extended period, typically longer than one year. It is considered as a part of the entity's long-term strategy rather than for immediate sale or consumption.
Long-term assets can take various forms, such as tangible or intangible assets. Tangible long-term assets include property, plant, and equipment (PPE), which are physical assets like land, buildings, machinery, vehicles, and furniture. Intangible long-term assets, on the other hand, refer to non-physical assets that hold value, like patents, trademarks, copyrights, intellectual property, goodwill, and long-term investments.
These assets are reported on a company's balance sheet and are typically presented separately from its short-term or current assets, which are more liquid and expected to be converted into cash within the next year. The valuation of long-term assets can be done through historical cost, fair market value, or a combination of both.
Long-term assets are crucial for a company's operations and growth as they contribute to the generation of revenue and profitability over an extended timeframe. They provide the necessary infrastructure, tools, and resources for businesses to operate efficiently and effectively. Furthermore, they can represent a significant portion of a company's value and can influence its creditworthiness, financial health, and long-term sustainability.
