Chapter 9
Fixed Assets
What Is a Fixed Asset?
A fixed asset is an item with a useful life greater than one year, and which exceeds an entity's minimum capitalization limit. It is not purchased with the intent of immediate resale, but rather for productive use within the entity. Fixed assets are also known as property, plant, and equipment.
What Is an Intangible Asset?
An intangible asset is a nonphysical asset having a useful life greater than one year. Examples of intangible assets are:
- Marketing-related intangible assets
- Trademarks
- Newspaper mastheads
- Internet domain names
- Noncompetition agreements
- Customer-related intangible assets
- Customer lists
- Order backlog
- Customer relationships
- Artistic-related intangible assets
- Performance events
- Literary works
- Musical works
- Pictures
- Motion pictures and television programs
- Contract-based intangible assets
- Licensing agreements
- Service contracts
- Lease agreements
- Franchise agreements
- Broadcast rights
- Employment contracts
- Use rights (such as drilling rights or water rights)
- Technology-based intangible assets
- Patented technology
- Computer software
- Trade secrets (such as secret formulas and recipes)
What Is a Capital Expenditure?
You have made a capital expenditure when you pay to acquire or upgrade an asset. You record a capital expenditure as a fixed asset, rather than charging it immediately to expense. Examples of capital expenditures are buildings, machinery, and office equipment.
Since there is a record-keeping cost associated ...
