Non-current assets
Non-current assets are resources your business keeps and uses for over a year, like property and equipment.
Published Monday 31 August 2026
Table of contents
Key takeaways
- Non-current assets are resources your business owns and uses for longer than 12 months, such as property, equipment, vehicles and patents.
- They fall into three broad groups: tangible assets, intangible assets and natural resources, with long-term financial investments also counting as non-current.
- You capitalise a non-current asset when you buy it, then spread its cost over its useful life through depreciation or amortisation.
- On the balance sheet, non-current assets are recorded at cost minus accumulated depreciation, giving lenders and investors a view of your long-term resources.
What are non-current assets?
Non-current assets are items your business holds for longer than 12 months to help generate revenue over time. Also called long-term assets or fixed assets, they are resources you intend to keep and use in your day-to-day operations, rather than cash or stock you plan to sell quickly.
When you buy a non-current asset, you capitalise the cost on your balance sheet rather than recording it as an expense straight away. The purchase price appears as an asset, and you gradually reduce its value over its useful life through depreciation or amortisation.
The 12-month threshold is what separates non-current assets from current assets. If you expect to use, sell or convert something to cash within a year, it is a current asset. If it will serve your business for longer than that, it is non-current.
Types of non-current assets
Non-current assets fall into three broad categories based on whether they have a physical form, exist as legal rights, or come from the natural world. Long-term financial investments, such as shares or bonds held for more than a year, are also treated as non-current assets.
Tangible assets
Tangible assets are physical items you can see and touch. They are sometimes called fixed assets or property, plant and equipment (PP&E). Common examples include office buildings, manufacturing machinery, delivery vehicles and office furniture.
Tangible assets lose value over time through wear and tear. You account for this through depreciation, which spreads the cost of the asset across its useful life.
Intangible assets
Intangible assets do not have a physical form but still hold value for your business. They include patents, trademarks, copyrights, goodwill and software licences.
Some intangible assets have a definite lifespan. A patent, for example, expires after a set number of years, while a well-known trademark can last indefinitely as long as you maintain it. You amortise intangible assets with a definite life over their useful period, and review indefinite-life assets regularly for impairment instead.
Natural resources
Natural resources include oil, gas, timber and mineral deposits that your business extracts and sells. These count as non-current assets only when your business is actively involved in extracting them.
As you extract natural resources, their value decreases through a process called depletion. This works similarly to depreciation but applies specifically to resources taken from the earth.
Non-current assets examples
Here are some common non-current assets that Philippine small businesses typically hold on their balance sheets.
- Land and buildings, such as an office, warehouse or retail premises
- Machinery and manufacturing equipment
- Company vehicles, including vans and delivery trucks
- Office equipment like computers, printers and phone systems
- Patents that protect your products or processes
- Trademarks on your business name or logo
- Goodwill from acquiring another business
- Long-term investments, such as shares held in another company for more than a year
- Software licences that cover multiple years
The specific non-current assets on your balance sheet depend on your industry. A construction company might hold heavy machinery, while a tech startup might list software and patents as its most valuable long-term assets.
Current vs non-current assets
The main difference between current and non-current assets is how quickly you can turn them into cash. Understanding this distinction helps you read your balance sheet clearly and manage your finances with confidence. Here is how they compare.
- Liquidity: current assets convert to cash within 12 months, while non-current assets are held for longer than a year
- Balance sheet placement: current assets appear in their own section near the top, while non-current assets sit in a separate section below
- Value changes: current assets are usually recorded at their realisable value, while non-current assets are recorded at cost minus accumulated depreciation or amortisation
- Purpose: current assets fund your short-term obligations, while non-current assets support long-term revenue generation
- Examples: current assets include cash, accounts receivable and stock, while non-current assets include property, equipment and patents
It is also worth knowing about non-current liabilities. These are debts or obligations your business does not need to settle within 12 months, such as long-term loans, mortgages or lease commitments. On the balance sheet, non-current liabilities sit alongside non-current assets to give a fuller picture of your long-term financial position.
How non-current assets appear on the balance sheet
Non-current assets sit in their own section on the balance sheet, typically listed below current assets. They give lenders, investors and you as a business owner a snapshot of the long-term resources your business holds.
Each non-current asset is initially recorded at its original cost, including the purchase price and any costs to get it ready for use. Over time, accumulated depreciation or amortisation is subtracted from that original cost. The resulting figure is called the carrying value or book value.
For example, if you bought a piece of equipment for ₱500,000 and it has ₱150,000 of accumulated depreciation, its carrying value on your balance sheet is ₱350,000. Cloud accounting software like Xero can help you track your fixed assets and keep your balance sheet up to date.
Depreciation and amortisation of non-current assets
Depreciation and amortisation are how you spread the cost of a non-current asset over the time you use it. The process matches the expense to the periods when the asset generates revenue for your business.
Depreciation applies to tangible assets like machinery, vehicles and office equipment. You estimate how long the asset will be useful, then allocate a portion of its cost as an expense each year. A common approach is straight-line depreciation, where you divide the cost evenly over the asset's useful life.
Amortisation works the same way but applies to intangible assets with a definite lifespan, such as patents or software licences. You spread the cost over the period the asset provides value.
If a non-current asset loses value unexpectedly, for example through damage or a drop in market conditions, you may also need to record an impairment. This is a one-off reduction in the asset's carrying value to reflect its lower recoverable amount.
Why non-current assets matter for your business
Non-current assets play a central role in how your business operates and grows. They are the tools, property and rights that help you earn revenue over the long term. From a financial planning perspective, they matter for several reasons.
- They generate revenue over multiple years, supporting your long-term profitability
- Lenders often accept non-current assets like property or equipment as collateral when you apply for a loan
- The level of investment in non-current assets signals whether your business is growing, maintaining, or scaling back its operations
- Depreciation of non-current assets reduces your taxable profit each year, lowering your tax bill
In the Philippines, tax depreciation is governed by the National Internal Revenue Code (NIRC) and administered by the Bureau of Internal Revenue (BIR). Section 34(F) of the NIRC allows a deduction for a reasonable allowance for the wear and tear of property used in your trade or business, which you claim across the asset's useful life using a BIR-accepted method such as straight-line depreciation (NIRC Title II, Chapter VII). Keeping accurate records of your non-current assets helps you claim the right deductions and stay on top of your obligations.
Manage your non-current assets with Xero
Tracking what your long-term assets are worth gets easier when the numbers live in one place. Xero's accounting software records each asset and calculates depreciation automatically, so your balance sheet stays current at tax time. Try Xero free and get one month free to see how it keeps your non-current asset records accurate.
FAQs on non-current assets
Here are answers to common questions about non-current assets for small businesses.
What is the difference between fixed assets and non-current assets?
Fixed assets are one type of non-current asset, specifically the tangible ones like property, plant and equipment. Non-current assets is the wider category that also covers intangible assets, natural resources and long-term investments.
How are non-current assets valued on a balance sheet?
Non-current assets are recorded at their original cost, less any accumulated depreciation or amortisation, which gives their carrying value. This carrying value can differ from what the asset would sell for on the open market.
Are non-current assets a debit or a credit?
Non-current assets carry a debit balance, because assets increase with a debit entry. The accumulated depreciation that offsets them sits as a credit in a contra asset account.
Can a non-current asset become a current asset?
Yes. If you decide to sell an asset and expect the sale to complete within 12 months, it is reclassified from non-current to current on the balance sheet.
Why do lenders care about your non-current assets?
Non-current assets such as property or equipment can serve as security for a loan, which lowers the lender's risk. Their value also signals how much your business has invested for the long term.
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.