Assets
Assets are economic resources. It is anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. Simply stated, assets represent value of ownership that can be converted into cash.
Asset Characteristics
- Assets represent probable present benefit, involving a capacity, solely, or in combination with other assets, to contribute directly or indirectly to future net cash flows, and, in the case of not-for-profit organizations, to provide services;
- The entity can control access to the benefit;
- The transaction or event giving rise to the entity's right to, or control of, the benefit has already occurred .
Interestingly enough, employees are not considered to be assets, like machinery is, even though they are capable of generating future economic benefits. This is because an entity does not have sufficient control over its employees to satisfy the definition of an asset.
Long-Lived Assets
Long-lived assets provide a company with a future economic benefit beyond the current year or operating period. It may be helpful to remember that most, but not all, long-lived assets start as some sort of purchase by the company. Since non-current, or long-lived, assets are expected to last for longer than one year, accounting treats long-lived assets differently according to their useful life.
All assets are resources controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise. When assets are expected to contribute to earnings for multiple years, such assets are referred to as long-lived, non-current or long-term assets. In general terms, it is "long-lived" because it is going to be around for some time and not quickly consumed.