← Back to Glossary
Fixed Assets
Definition
Fixed assets are long-term tangible assets that a business owns and uses in its operations to generate income, with a useful life of more than one year.
Explanation
Fixed assets, also known as property, plant, and equipment (PP&E), include buildings, machinery, vehicles, computers, furniture, and land. Unlike current assets, fixed assets are not expected to be converted to cash within a year.
Fixed assets are recorded at purchase cost and depreciated over their useful lives, except for land which is not depreciated. They are subject to impairment testing and are reported on the balance sheet at net book value.
Example
A manufacturing company's fixed assets include a factory building ($2 million), production machinery ($500,000), and delivery vehicles ($200,000).