This article explains the core terms related to fixed assets in Qoyod: asset definition, category, depreciation, useful life, net book value, salvage value, and asset types.
Fixed Asset
Anything with a tangible physical existence that enables the entity to obtain future economic services or benefits, whose rights were acquired as a result of past events or operations, provided that:
- It can be financially measured with an acceptable degree of confidence.
- It is not directly linked to an obligation that cannot be measured.
- Its purpose of acquisition is to be used for more than one financial period.
Examples: land, buildings, machinery, equipment, vehicles, office equipment.
Asset Category
Dividing fixed assets into groups, with each group having a defined depreciation rate and useful life.
Depreciation
The expenses resulting from the use of the asset throughout its useful life. It is the decrease in the historical value of the asset caused by usage.
Useful Life
The period of time during which the asset is expected to be used by the entity. It can be measured by the total number of production units expected from the asset or by a time period.
Net Book Value of the Asset
The historical cost of the asset adjusted by its accumulated depreciation balance.
Salvage Value
The expected value of the asset after the end of its useful life.
Types of Fixed Assets
- Non-Depreciable Assets: such as land.
- Depreciable Assets: defined by a specific useful life, such as buildings, machinery, and vehicles.
