What Are Non-Current Assets?
Non-current assets are economic resources a business holds for longer than 12 months or one full operating cycle, with no expectation of converting them to cash within the financial year. Also known as long-term assets, they are acquired for use in operations and investment rather than for quick resale.
They appear on the balance sheet after current assets and form the productive base the business relies on to generate revenue over the long term.
Types of Non-Current Assets
Non-current assets fall into four main categories:
- Tangible assets (property, plant and equipment): land, buildings, machinery, vehicles, and furniture. All are depreciated periodically except land. This category is commonly called fixed assets.
- Intangible assets: patents, trademarks, goodwill, and software licenses. They are amortized over their useful life or tested annually for impairment.
- Long-term investments: stakes in subsidiaries or associates, plus bonds and sukuk maturing beyond the financial year.
- Deferred tax assets: recoverable amounts arising from timing differences between accounting profit and the tax base.
Companies in mining and energy add a fifth category, natural resources such as gas fields and mines, which are depleted over time.
Current vs Non-Current Assets
| Comparison | Current assets | Non-current assets |
|---|---|---|
| Holding period | Less than 12 months | More than 12 months |
| Liquidity | High, convert to cash quickly | Low, selling takes time |
| Purpose | Funding daily operations | Building productive capacity |
| Examples | Cash, inventory, accounts receivable | Buildings, machinery, trademarks |
| Accounting treatment | Measured at cost or net realizable value | Depreciated or amortized over useful life |
Depreciation and Book Value
The cost of a tangible asset is spread over its estimated useful life through periodic depreciation entries, while finite-life intangible assets are amortized the same way. Goodwill and indefinite-life assets are instead tested annually for asset impairment.
Net book value = historical cost − accumulated depreciation.
Qoyod includes a dedicated fixed-assets module that registers each asset and calculates its depreciation automatically using the straight-line method, keeping book values up to date on the balance sheet without manual entries.
Why Non-Current Assets Matter in Financial Analysis
The ratio of non-current assets to total assets reveals how capital-intensive a business is. Manufacturers carry heavy machinery and plants, while digital service companies rely mostly on intangible assets.
Lenders and banks pay close attention to these assets because they serve as financing collateral. IFRS, as adopted in Saudi Arabia, also requires disclosure of depreciation methods, useful lives, and impairment losses in the notes to the financial statements.
Practical Example
The balance sheet of a Saudi manufacturing company lists the following non-current assets:
- Land at a cost of SAR 2,000,000, not subject to depreciation.
- Buildings at a cost of SAR 5,000,000 with accumulated depreciation of SAR 1,200,000, giving a book value of SAR 3,800,000.
- Machinery at a cost of SAR 3,000,000 with accumulated depreciation of SAR 800,000, giving a book value of SAR 2,200,000.
- Software licenses worth SAR 500,000.
Net non-current assets = 2,000,000 + 3,800,000 + 2,200,000 + 500,000 = SAR 8,500,000.