Definition of Long-term Asset
A long-term asset is an asset that is not expected to be converted to cash or be consumed within one year of the date shown in the heading of the balance sheet. (If a company has an operating cycle that is longer than one year, a long-term asset is not expected to turn to cash within the operating cycle.) Expressed another way, a long-term asset is an asset that does not meet the criteria of being reported as a current asset. Hence, long-term assets are also known as noncurrent assets or long-lived assets.
Examples of Long-term Assets
Long-term assets include the following:
- Long-term investments. These include some investments in stocks and bonds of other corporations, a company’s bond sinking fund, the cash surrender value of life insurance policies owned by the company, real estate awaiting to be sold, etc.
- Property, plant and equipment. This classification includes land, buildings, machinery, equipment, vehicles, fixtures, etc. that are used in the business. These assets are reported at cost and the contra asset accumulated depreciation is also included.
- Intangible assets. These include trademarks, patents, customer lists, goodwill, etc. that were acquired in a transaction.
- Deferred charges. This category is used for items that do not fit into the other long-term asset classifications.
