Fixed Assets: Types, Valuation, and Accounting

Fixed assets are company-owned property used for more than one year for operational purposes and generating economic benefit. These can include buildings, equipment, software, or even investments.

Accounting and proper management of fixed assets are essential parts of a company’s financial management. In this article, we’ll discuss the main types of fixed assets, valuation methods, accounting specifics, common mistakes, and how business management systems can simplify the process.

Tangible fixed assets are physical, tangible items used by a company for more than one year in its operations. These assets not only serve a practical function in daily activities but often make up the largest portion of a company’s balance sheet.

Examples:

• Buildings and structures: administrative buildings, warehouses, production facilities
• Vehicles: cars, trucks, forklifts
• Production equipment: machines, presses, conveyors
• Furniture and office equipment: desks, chairs, computers, printers

Accounting specifics:

Tangible assets are recorded at acquisition cost, which includes not only the purchase price but also additional costs: transportation, installation, taxes. Depreciation is calculated from this value—regularly reducing the asset’s book value using the company’s chosen method (straight-line, accelerated, etc.).

Management:

Using Rivile ERP, depreciation, accounting, and reporting can be easily tracked for internal analysis and audits. This is especially relevant for companies with significant physical assets that want centralized management.

Intangible fixed assets are assets without physical form but valuable due to rights, licenses, or intellectual property. Though invisible, such assets are often crucial for a company’s competitiveness and innovation.

Examples:

• Software: accounting systems, production management solutions, custom-built programs
• Trademarks and brand names: registered trademarks, company logos
• Licenses and permits: operating licenses, technology usage agreements
• Patents and copyrights: invention protection, creative projects

Accounting:

These assets are recorded as intangible fixed assets if their useful life exceeds one year, they bring benefit, and can be reliably valued. Amortization is typically applied over the asset’s useful life.

Business benefit:

Properly managed intangible assets can strengthen market position, create uniqueness, and enable more efficient operations. It’s especially important to document and monitor them consistently—this can be done using tools like Rivile MGAMA, which helps manage licenses, contracts, and other documents.

Financial fixed assets are investments or financial instruments that a company plans to hold for more than one year. Unlike tangible or intangible assets, their purpose is to generate returns or influence other companies.

Examples:

• Shares: ownership in other companies, granting rights to dividends or voting
• Bonds and investment funds: capital invested for stable returns
• Long-term loans: issued to other companies or related parties
• Term deposits: funds held in banks for a fixed period with interest

Accounting specifics:

Financial assets are recorded at acquisition cost but may later be valued at market value or according to accounting standards. These assets are not amortized but may be revalued (or written down) depending on market conditions or risk.

Important to know:

Investment accounting must comply with financial reporting requirements, and inaccuracies can distort the company’s financial picture. A transparent accounting system is useful for accurately recording and tracking all financial instruments.

Determining the value of fixed assets is the first and one of the most important steps in asset accounting. The value affects not only accounting entries but also depreciation, taxes, and the accuracy of financial statements.

Initial value (acquisition cost):

Usually determined by the total amount paid for the asset, including:

• Purchase price (excluding VAT)
• Transportation and installation costs
• Insurance, customs, and other additional expenses
• Internal labor value if the asset was created in-house

Subsequent value changes:

Asset value may be:

• Revalued – if market value changes significantly (e.g., real estate)
• Written down – due to depreciation or loss (e.g., fire, theft)
• Increased – if significant investments are made in upgrades or adaptation

Fixed asset accounting covers the entire asset lifecycle—from acquisition to disposal. This allows companies to control assets and plan financial flows accurately.

Main accounting steps:

• Registration: Asset is entered into the fixed asset register with a unique ID
• Depreciation calculation: Monthly or annual depreciation based on the chosen method (straight-line, declining balance)
• Reporting: Reports on residual value, depreciation, disposal, or repairs
• Inventory: Periodic checks of asset presence and condition

Business benefit:
Accurate asset accounting ensures correct profit calculation and reduces tax risks.

Even fixed assets have an “end of life.” When an asset becomes unusable or not worth repairing, it is written off or sold.

Write-off means the asset is removed from accounting due to:

• Full depreciation
• Physical destruction (e.g., breakdown, accident)
• Obsolescence or outdated technology

If the asset still has market value, it can be sold. In that case:

• Profit or loss is calculated as the difference between sale price and residual value
• An invoice must be issued
• Income is declared and taxed

It’s convenient when disposal and sale operations are recorded in one system—ensuring control, accurate entries, and report generation without extra work.

Investment property is fixed assets acquired not for operational use but for investment purposes. Its goal is not production or service delivery but value appreciation or steady income (e.g., rent).

Typical examples:

• Commercial real estate
• Rental apartments or buildings
• Land held for resale
• Shares or stakes in other companies (if not considered strategic assets)

Accounting specifics:

• Can be valued at fair market value or acquisition cost
• May be revalued regularly depending on market conditions
• Rental income or value gains are declared separately from core business

Why is this important?

Investment property can be an alternative way for a company to accumulate capital, diversify risk, and secure additional cash flow. However, its value, return, and tax implications must be carefully monitored.

What is the difference between tangible and intangible fixed assets?
Tangible assets are physical objects (e.g., buildings, equipment), while intangible assets are non-physical but beneficial (e.g., licenses, software).

What is asset revaluation and when is it needed?
It is the update of a fixed asset’s value based on market conditions. It is necessary when the market value changes significantly or when the company wants to reflect its actual financial position.

What are the most common mistakes in managing fixed assets?
The most common ones include: using an incorrect depreciation method, delayed write-offs, incomplete documentation, and unrecorded asset losses.