The Finance Book, 2nd Edition

9 Tangible fixed assets and depreciation

‘Nothing lasts forever...’

Arnold H. Glasow, American author

In a nutshell

Tangible fixed assets (TFA) are assets that possess physical substance. Examples include land, property, equipment, motor vehicles, etc.

The term fixed denotes an intention by the company to use the asset within the business over the long term (in excess of one year), i.e. to generate revenues over a number of years. This is in contrast to current assets, such as stock, where the speed or frequency of sale is often considered the key objective (see Chapter 11 Stock).

The cost of using TFA is recognised through depreciation. Depreciation is an accounting expense which attempts to spread the cost of TFA over their life in the ...