A noncurrent asset is an asset that is not expected to be consumed within one year. If a company has a high proportion of noncurrent to current assets, this can be an indicator of poor liquidity, since a large amount of cash may be needed to support ongoing investments in noncash assets.
Some noncurrent assets, such as land, may theoretically have unlimited useful lives. A noncurrent asset is recorded as an asset when incurred, rather than being charged to expense at once. Depreciation, depletion, or amortization may be used to gradually reduce the amount of a noncurrent asset on the balance sheet.
In a capital-intensive industry, such as oil refining, a large part of the asset base of a business may be comprised of noncurrent assets. Conversely, a services business that requires a minimal amount of fixed assets may have few or no noncurrent assets.
Noncurrent assets are aggregated into several line items on the balance sheet, and are listed after all current assets, but before liabilities and equity.
Examples of noncurrent assets are:
- Long-term investments
- Intangible fixed assets (such as patents)
- Tangible fixed assets (such as equipment and real estate)
There is more risk associated with noncurrent assets than with current assets, since they may decline in value during their extended holding periods. An excessive amount of reduction in value may lead to an impairment charge.