Net fixed assets

Net fixed assets is the aggregation of all assets, contra assets, and liabilities related to a company's fixed assets. The concept is used to determine the residual fixed asset or liability amount for a business. The calculation of net fixed assets is:

+ Fixed asset purchase price (asset)
+ Subsequent additions to existing assets (asset)
- Accumulated depreciation (contra asset)
- Accumulated asset impairment (contra asset)
- Liabilities associated with the fixed assets (liability)
= Net fixed assets

The net fixed assets calculation is useful for someone evaluating the fixed assets of an acquisition candidate, and who must rely on financial information to develop an opinion about those assets. If the calculation yields a very small amount in proportion to the gross amount of fixed assets, this implies that the company has not invested in the replacement or upgrade of its fixed assets - in short, the acquirer may find itself replacing many of the fixed assets of the target company.

For example, a potential acquiree has listed on its balance sheet gross fixed assets of $1,000,000, $150,000 of accumulated depreciation, and $200,000 of accumulated impairment charges. Based on this information, the acquiree has net fixed assets of $650,000.

The concept is of less use for internal management purposes, since managers can easily review the fixed assets in person and consult maintenance records to determine whether fixed assets should be replaced.

Related Courses

Fixed Asset Accounting 
How to Audit Fixed Assets 
The Interpretation of Financial Statements