Asset

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This article is about the finance definition. For other uses, see Asset (disambiguation).

Part of a series on

Accounting

 Historical cost
 Constant purchasing power
 Management
 Tax

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Major types

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Key concepts

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Selected accounts

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Accounting standards

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Financial statements

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Bookkeeping

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Auditing
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People and organizations

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Development

 v
 t
 e

In financial accounting, an asset is any resource owned or controlled by a business or

an economic entity. It is anything (tangible or intangible) that can be utilized to produce
value and that is held by an economic entity and that could produce positive economic
value. Simply stated, assets represent value of ownership that can be converted
into cash (although cash itself is also considered an asset). [1] The balance sheet of a firm
records the monetary[2] value of the assets owned by that firm. It covers money and
other valuables belonging to an individual or to a business.[1]
One can classify assets into two major asset classes: tangible assets and intangible
assets. Tangible assets contain various subclasses, including current assets and fixed
assets.[3] Current assets include inventory, accounts receivable, while fixed assets
include buildings and equipment.[4] Intangible assets are non-physical resources and
rights that have a value to the firm because they give the firm an advantage in the
marketplace. Intangible assets
include goodwill, copyrights, trademarks, patents, computer programs,[4] and financial
assets, including financial investments, bonds and stocks.

Contents

 1Formal definition
 2Characteristics
o 2.1Accounting
o 2.2Current assets
o 2.3Long-term investments
o 2.4Fixed assets
o 2.5Intangible assets
o 2.6Tangible assets
o 2.7Wasting asset
o 2.8Comparison: current assets, liquid assets and absolute liquid assets
 3See also
 4References

Formal definition[edit]
IFRS (International Financial Reporting Standards), the most widely used financial
reporting system, defines: "An asset is a present economic resource controlled by the
entity as a result of past events.[5] An economic resource is a right that has the potential
to produce economic benefits."[6]
The definition under US GAAP (Generally Accepted Accounting Principles used in the
United States of America): "Assets are probable future economic benefits obtained or
controlled by a particular entity as a result of past transactions or events." [7]

Characteristics[edit]
Con 6[7] provides the following discussion of the nature of an asset:
An asset has three essential characteristics:
(a) it embodies a probable future benefit that involves a capacity, singly or in
combination with other assets, to contribute directly or indirectly to future net cash
inflows,
(b) a particular entity can obtain the benefit and control others’ access to it, and
(c) the transaction or other event giving rise to the entity’s right to or control of the
benefit has already occurred.
This accounting definition of assets necessarily excludes employees because, while
they have the capacity to generate economic benefits, an employer cannot control an
employee.
Similarly, in economics, an asset is any form in which wealth can be held.
There is a growing analytical interest in assets and asset forms in other social
sciences too, especially in terms of how a variety of things (e.g., personality, personal
data, ecosystems, etc.) can be turned into an asset. [8]