tangible fixed assets

1. Fixed Tangible Assets
Presented By
Dipanway Bhabuk

2. Fixed Assets
How do you define Fixed assets??
 Assets held with the business for more than a year.
 Held with the intention of being used for producing
goods/services.
 Not directly sold to the end consumer.
 Form significant portion of total assets.
 Reported cost of fixed assets = purchase price- discounts
on purchase +duties, charges and any other directly
attributable cost.

3. Fixed Assets
Tangible Assets Intangible Assets
 Land
 Building
 Plant & Machinery
 Equipment, Furniture &
Fixtures
 Vehicles
Goodwill
Patents
Trademarks
Brand name

4. Land Can be bought by a business either for use or investment.
 Includes all cost associated with acquiring the land such as
registration charges, stamp duty, brokerage, appraisals etc.
 If land is purchased as a building site, certain expenses may
be added to the cost: razing and removal, land or site
improvements, utilities to site, and landscaping activity
associated with new construction.
 It is not a depreciating asset.
 Requirement of land differs across different industries.
Eg. A coffee shop would directly purchase a shop in a
commercial complex or a mall, where as a steel company
would require land to set up its manufacturing unit

5. Buildings Can be purchased or constructed on own land.
 Costs include the purchase price, professional
services, appraisals, test borings, site
preparation, materials, labor, plumbing, electric
wiring and overhead as a direct result of the
project during construction.
 Building improvements such as cost for
renovations, betterments, or improvements that
add to the permanent value of the asset, make
the asset better than it was when purchased, or
extend its life beyond the original useful life are
also included in the cost.

6. Plant & Machinery
Includes all expenses incurred from the
time of placing the order till the start of
commercial production. They include
expenses such as :-
 The invoice price of the plant paid to
the supplier.
 The freight paid to bring the plant to
the installation site.
 The installation fees paid to the
engineers.
 The cost incurred on testing the plant
etc.

7. Vehicles
 Whether businesses own a few company
cars or a fleet of trucks, automobiles of
all types taken as fixed assets.
 The cost includes:-
 vehicle’s purchase price,
 registration and licence plate fees, the
cost of accessories
 the cost of transporting the vehicle to
the place where it is first to be used.

8. Equipment, Furniture & Fixture
 In addition to the net invoice price of an
asset, the cost of the equipment may also
include the cost of installation,
transportation, taxes, duty, or in-transit
insurance.
 All costs associated with modifications,
attachments, accessories, or auxiliary
apparatus necessary to make the property
usable for its intended purpose may also be
capitalized, only if incurred at the time of
initial equipment purchase.
 Eg. Office chairs, office desk, book case,
storage cabinets, computers, air
conditioners etc.

9. Leasehold property- Capital lease
 In a capital lease, the company pays rent for using an
asset for a period of 99 years, at the end of which the
ownership of the asset passes on to the company
(lessee).
 It has the same impact as that of a purchase made on
an installment plan.
 The asset is shown under fixed assets and the lease
obligations are shown as a long term Liability.

10. Leasehold improvements
 Improvements performed on a leased property,
such as additions, alterations, remodeling, or
renovations.
 Treated as fixed asset in the balance sheet and are
depreciated/amortized over the remaining life of
the lease term or the life of the improvement
(whichever is shorter).

11. Capital Work in progress
 Capital WIP is referred to as Assets under
Construction
 It is an asset on the balance sheet that is not
considered to be a final product, but must still be
accounted for because funds have been
invested toward its production. It is thus a work
that has not been completed but has already
incurred a capital investment.
 Usually depreciation is not charged on Capital
WIP.
 Eg.
- A machinery under installation
- A building under construction

12. Depreciation
The monetary value of an asset decreases over time due to use,
wear and tear or obsolescence. This decrease is measured as
depreciation. Accounting estimates the decrease in value
using the information regarding the useful life of the asset.
Purpose : Matching the expense with the usage of the asset
Written Down
Value (WDV)
Method
Straight Line
method (SLM)
Depreciation
methods

13. Depreciation
- =
 The Net block of Fixed assets is shown in the balance sheet.
Also called the book value of the asset.
 Different rates of depreciation for various assets given in the
Companies Act (follows WDV or SLM) as well as Income Tax
Act(follows only WDV)
 Eg. Furniture &Fixtures are depreciated at 10% as per Income
Act & 18.1% as per Companies Act (WDV)
Gross Block
Accumulated
Depreciation
Net Block/Book
value of asset

14. Revaluation
 Sometimes assets are revalued to show their fair
market value on the balance sheet.
 When revalued, the assets are showed at a higher
revalued amount.
 The revaluation leads to an increase in owner’s
equity and hence, an amount corresponding to
the difference between the revalued amount
and book value is shown as revaluation reserves
under Reserves & Surplus.

15. Impairment
 A capital asset is considered to be impaired when
its service utility has permanently declined
significantly and unexpectedly due to evidence
of physical damage, changes in legal or
environmental factors, technological changes or
evidence of obsolescence.
 Such charges are usually nonrecurring, and may
relate to any type of asset.
 The asset is permanently reduced on the balance
sheet and the impairment is shown as a loss in the
P&L Account.

16. Fixed asset structure across
industries
Fixed assets turnover = Net sales/ Net fixed assets(Net block)
TVS Marico Zensar
Fixed Assets turnover (FY2013) 7.59 10.56 10.59

17. The End