Glossary
Tangible asset
An asset with a physical form that you can touch, such as machinery or a building.
What it means
A non-current asset with physical substance held for use in the business over the long term.
Example
Delivery vehicles, fixtures and premises are tangible assets.
Why it matters
Tangible assets are usually depreciated over their useful lives as they wear out.
In practice
Tangible assets appear under non-current assets near the top of the statement of financial position. They are shown at cost less accumulated depreciation, which gives the net book value. They have physical form, so they can be seen and touched. Most are depreciated over their useful life because they wear out.
A firm buys machinery for RM30,000 and depreciates it at RM6,000 a year. After the first year, the net book value is RM24,000. The annual depreciation charge is an expense in the income statement. The asset itself stays in the statement of financial position.
The obvious contrast is with intangible assets such as goodwill. Both are non-current and both may be written down over time. A tangible asset has physical form and can usually be sold on its own. An intangible asset has value only through the rights or advantages it gives. Current assets such as inventory differ again. They are held for short-term resale, not long-term use.
If you are unsure how to classify assets in the statement of financial position, one of our teachers can go through the headings with you. Book a trial class.
Related terms
Definitions here are general accounting explanations for study. For your board's exact wording, see its official syllabus via Sources.
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