Fixed assets
Learn what fixed assets are, how depreciation works and how to claim capital allowances in Singapore.
Published Wednesday 30 September 2026
Table of contents
Key takeaways
- Fixed assets are long-term physical items your business owns and uses to earn income, such as equipment, vehicles, computers and property. They appear on the balance sheet as property, plant and equipment (PP&E).
- You record fixed assets at cost and spread that cost over their useful life through depreciation. Land is the main exception, as it isn’t depreciated.
- In Singapore, depreciation isn’t tax-deductible, but you can claim capital allowances on qualifying plant and machinery. You can write off costs over one year, three years or the asset’s prescribed working life.
- A fixed asset register helps you track depreciation and keep the records the Inland Revenue Authority of Singapore (IRAS) expects. Companies need to keep records for at least five years.
What are fixed assets?
Fixed assets are long-term physical items your business owns and uses to earn income for more than 12 months. You buy them to use, so they keep delivering value year after year.
In accounting, fixed assets are also called property, plant and equipment (PP&E). They sit under non-current assets on your balance sheet.
Think of a bakery’s commercial oven. It costs thousands of dollars and bakes bread every day for years. That long useful life is what makes it a fixed asset, while the flour it bakes with is an everyday expense.
Why fixed assets matter for your business
Your fixed assets shape how lenders and investors see the business. Tracking them well gives you a clearer picture of what your business is worth.
Their value affects your borrowing capacity and your investment decisions. For Singapore small businesses, fixed assets also affect tax, because you claim capital allowances on them instead of depreciation. Getting the accounting right from day one makes filing your tax return much simpler.
Key characteristics of fixed assets
A handful of traits tell you whether a purchase belongs on the balance sheet as a fixed asset. Checking each one helps you classify purchases consistently.
Tangibility
Fixed assets are physical items you can see and touch. That sets them apart from intangible assets such as patents and trademarks, which are long-term but have no physical form.
Long useful life
A fixed asset gives your business economic benefit for more than one accounting period, usually more than 12 months. A laptop you’ll use for three years is a fixed asset, while a box of printer paper you’ll finish this week is an expense.
Held for use in the business
Your business buys fixed assets to use them in its operations. A delivery van that carries your goods is a fixed asset. For a car dealer, though, the vehicles in the showroom are inventory, because they’re there to be sold.
Capitalisation and depreciation
When you buy a fixed asset, you capitalise the cost, which means it goes on the balance sheet as an asset. You then write off that cost gradually over the asset’s useful life through depreciation. This matches the expense to the periods in which the asset helps you earn revenue.
Illiquidity
Fixed assets take time to turn into cash. Selling a machine or a building can take weeks or months, compared with drawing on money in the bank. That’s why they sit in the non-current section of your balance sheet.
Examples of fixed assets
The fixed assets you own depend on your industry and how you operate. Here are common categories for Singapore small businesses:
- Land your business owns for its premises or operations
- Buildings such as offices, warehouses, workshops and shophouses you own
- Vans and lorries used for deliveries and site work
- Company cars registered with a Certificate of Entitlement (COE)
- Machinery and production equipment, such as kitchen equipment or manufacturing lines
- Computers, servers, printers and networking hardware
- Office furniture, shelving, lighting and fittings
- Renovations to rented premises that add lasting value
Which items you capitalise also depends on your capitalisation policy. Many small businesses set a minimum cost threshold, and anything below it is expensed straight away.
Fixed assets vs current assets
Your balance sheet splits assets into two main groups: fixed (non-current) assets and current assets. Knowing the difference helps you read your financial statements and see how your money is working.
Current assets are items you expect to sell or turn into cash within 12 months. They include cash, inventory, trade debtors and prepayments, and they keep day-to-day operations running.
Fixed assets are the long-term items you rely on for more than one year. Current assets rise and fall month to month, while fixed assets stay on your balance sheet and lose value gradually through depreciation.
Healthy businesses need both. Strong current assets support short-term liquidity, while fixed assets show investment in long-term capacity. For a side-by-side view, see this breakdown of how the two asset types compare.
How fixed assets are recorded on the balance sheet
Recording these assets correctly keeps your financial statements accurate and your capital allowance claims easy to support. Here’s how it works from purchase to ongoing reporting.
Capitalising the cost
When you buy a fixed asset, you record its cost on the balance sheet instead of as an expense in your profit and loss statement. The cost includes the purchase price plus costs needed to get the asset ready for use, such as delivery and installation fees.
You record the purchase with a journal entry that debits the fixed asset account. The matching credit goes to your bank account, or to a loan account if you financed the purchase.
Capitalising vs expensing repairs and improvements
Spending on an asset after you buy it falls into one of two groups. The test is whether the spending keeps the asset working as it is or makes it better.
Routine repairs and servicing keep an asset running, so you expense them in the period you pay for them. Improvements that extend the asset’s useful life or increase its capacity get capitalised and added to its cost.
For example, replacing worn tyres on your delivery van is a repair expense. Fitting a refrigeration unit so the van can carry chilled goods is an improvement you capitalise.
Where fixed assets sit on the balance sheet
Fixed assets appear in the non-current assets section of your balance sheet. They’re usually shown at net book value, which is the original cost minus accumulated depreciation to date. This gives anyone reading your accounts a realistic view of what those assets are worth to the business.
Accumulated depreciation
Each year, you record a depreciation charge that reduces the asset’s carrying value. The running total of those charges since purchase is called accumulated depreciation. It sits against the asset’s original cost, so the balance sheet shows net book value at any point.
Depreciation of fixed assets
Depreciation means spreading the cost of a fixed asset over its useful life. You recognise part of the cost in each period you use the asset, instead of all of it in the year you buy.
Why depreciation matters
Depreciation shows the true cost of running your business in each period. Without it, profit would look unusually low in the year of purchase and unusually high in the years after. It also shows how much value your assets have used up, which helps you plan replacements.
Common depreciation methods
Small businesses mostly use one of two methods. Choose the one that best reflects how the asset loses value in practice:
- Straight-line depreciation spreads the cost, minus any residual value, evenly over the useful life
- Reducing balance depreciation applies a fixed percentage to the asset’s remaining book value each year
Take a S$10,000 machine with a five-year life and no residual value. Straight-line depreciation gives S$2,000 a year. A 30% reducing balance rate gives S$3,000 in year one and S$2,100 in year two.
Reducing balance puts more of the expense into the early years. It suits assets such as vehicles and technology, which lose value fastest when they’re new.
Assets that don’t depreciate
Land is the main exception, because it generally doesn’t wear out or become obsolete. If you buy a property that includes land and a building, split the cost and depreciate only the building portion.
Accounting standards for fixed assets in Singapore
Singapore’s rules for property, plant and equipment follow international principles. Depending on your company, you’ll report under Singapore Financial Reporting Standards (International) 1-16, known as SFRS(I) 1-16, or Financial Reporting Standard 16 (FRS 16).
Both are closely aligned with International Accounting Standard 16 (IAS 16), which sets out how to recognise and measure these assets. According to Deloitte’s IAS Plus overview of Singapore reporting, Singapore has adopted substantially all standards issued by the International Accounting Standards Board.
How to calculate depreciation and net book value
Five steps take you from an asset’s purchase price to its net book value. The example follows a bakery that buys a commercial oven and uses straight-line depreciation.
1. Work out the asset’s cost
Add the purchase price to the costs of getting the asset ready for use. The bakery pays S$11,000 for the oven plus S$1,000 for delivery and installation, so its cost is S$12,000.
2. Estimate its useful life and residual value
Useful life is how long you expect to use the asset, and residual value is what you expect to get for it at the end. The bakery expects to use the oven for five years and sell it for S$2,000 afterwards.
3. Choose a depreciation method
Pick the method that matches how the asset loses value. The oven wears evenly over time, so the bakery chooses straight-line depreciation.
4. Calculate the annual depreciation charge
Subtract the residual value from the cost, then divide by the useful life. For the oven, S$12,000 minus S$2,000 is S$10,000, and S$10,000 divided by five years gives a charge of S$2,000 a year.
5. Work out accumulated depreciation and net book value
Multiply the annual charge by the years the asset has been in use to get accumulated depreciation. After three years, the oven’s accumulated depreciation is S$6,000. Subtract that from the S$12,000 cost, and its net book value is S$6,000.
Capital allowances on fixed assets in Singapore
In Singapore, IRAS lets you claim capital allowances on qualifying plant and machinery under the Income Tax Act 1947. These allowances take the place of the depreciation in your accounts, which isn’t tax-deductible.
Write-off options for qualifying assets
IRAS gives you a choice of how quickly to write off the cost of qualifying assets. These options are available now:
- Write off computers and prescribed automation equipment in one year
- Write off low-value assets costing up to S$5,000 each in one year, with total claims capped at S$30,000 per Year of Assessment (YA)
- Write off other qualifying plant and machinery evenly over three years
- Write off the cost over the asset’s prescribed working life
A faster write-off lowers your taxable income sooner, which can help cash flow in the year you buy. A two-year option also existed, but it only applied to assets bought in the basis periods for YA 2021, YA 2022 and YA 2024.
Capital allowances on vehicles
Vehicle rules depend on the type of registration plate, so check it before you claim. You can’t claim capital allowances on S-plated private cars or on Q-plated and RU-plated business cars. The exception is cars registered as private hire cars or cars for instructional purposes.
Vans, lorries and motorcycles bought for business use do qualify. For a qualifying vehicle, the COE forms part of the vehicle’s cost, so you can include it in your claim.
Assets funded by government grants
Grants reduce the cost you can claim on. Capital allowances don’t apply to the portion of an asset funded by a government or statutory board capital grant. This covers grants approved on or after 1 January 2021.
You can still claim on the part you paid for yourself. If a S$50,000 machine is partly funded by a S$20,000 grant, your claim is based on the remaining S$30,000.
Buildings and land
Buildings follow separate rules from plant and machinery. The Industrial Building Allowance has been phased out for spending from 23 February 2010, apart from specific transitional cases. Land cost doesn’t qualify either.
The fixed asset lifecycle
Every fixed asset follows a path from purchase to disposal. Knowing each stage helps you manage costs and plan ahead.
Acquisition
The lifecycle starts when you buy the asset. You record its full cost on the balance sheet, including delivery and installation, and set its useful life and depreciation method.
Use and maintenance
While the asset works for your business, regular maintenance helps it last longer and hold its value. You record depreciation each year and capitalise any improvements that extend its life or capacity.
Review and impairment
Review each asset regularly, for example, at each year end. If an asset’s value falls well below its book value because of damage or obsolescence, you record an impairment loss. This brings the balance sheet in line with what the asset can still recover.
Disposal
Disposal comes when you sell or scrap an asset. In your accounts, you remove its cost and accumulated depreciation. If the sale price differs from net book value, you record a gain or loss on disposal in your profit and loss statement.
Tax has its own disposal rules. Under IRAS rules, you may need to calculate a balancing allowance or balancing charge. This applies when you sell, write off or convert to trading stock an asset you’ve claimed allowances on.
You compare the sale proceeds with the asset’s tax written-down value. If proceeds are lower, the difference is a balancing allowance you can deduct. If they’re higher, the difference is a balancing charge that’s taxable, capped at the allowances you’ve already claimed on that asset.
Fixed asset management for small businesses
A simple, consistent system keeps fixed asset tracking manageable. It saves you time at year end and shows you exactly what your business owns.
Keeping a fixed asset register
A fixed asset register lists every fixed asset your business owns. For each one, note the description, purchase date, cost, depreciation method, useful life and current net book value.
Updating the register as you go, starting with recording each purchase, makes it your go-to document for preparing accounts and claiming capital allowances.
Tracking depreciation
Recording depreciation each period keeps your financial statements accurate. Fixed asset software can calculate these charges for you, replacing manual spreadsheet work and cutting the risk of errors. Your balance sheet and profit and loss figures then stay up to date.
Planning for replacements
When you know how much useful life each asset has left, you can budget for replacements early. Compare the total cost of keeping an ageing machine, including rising repair bills, with the cost of replacing it. This matters most for expensive items like vehicles and machinery, where a breakdown can disrupt operations and cash flow.
Running physical checks to spot ghost assets
Your register works best when it matches what’s physically in your premises. Count and inspect your assets at least once a year, and compare what you find with the register.
Items that are listed but lost, stolen or scrapped are called ghost assets. Removing them keeps your balance sheet accurate and stops you depreciating assets you no longer have.
Keeping records for 5 years
Your fixed asset records support the figures in your tax return. IRAS record-keeping rules require companies to keep proper records and accounts for at least five years from the relevant YA. Keep purchase invoices, delivery orders, grant letters and disposal documents with your register.
Manage your fixed assets with Xero
Accurate fixed asset records help you plan investments and claim the capital allowances you’re entitled to. With your register and depreciation alongside your balance sheet, you spend less time on admin and more time running your business.
Xero keeps your fixed asset figures current and lets you work with your accountant in real time. Try Xero today and get one month free.
FAQs on fixed assets
Here are quick answers to common questions from Singapore business owners.
Is inventory a fixed asset?
No, inventory is a current asset because you hold it for sale. The same item can be either, depending on the business: a laptop is a fixed asset for an accounting firm but inventory for an electronics retailer.
Are intangible assets the same as fixed assets?
They’re both long-term assets, but intangible assets such as software licences and trademarks have no physical form. You spread their cost through amortisation instead of depreciation, and report them separately on the balance sheet.
What is a fixed asset register?
A fixed asset register lists every fixed asset you own, with its cost and current book value. It supports your capital allowance claims, since each asset’s cost and purchase date drive your allowances and any balancing adjustment on sale.
Can fixed assets increase in value?
Some can, particularly land and buildings. Under SFRS(I) 1-16 and FRS 16, you can choose the cost model or the revaluation model. Most small businesses use the cost model because it’s simpler to maintain.
How do you calculate net fixed assets?
Add up the original cost of all your fixed assets, then subtract total accumulated depreciation and any impairment losses. Comparing this figure year on year shows whether you’re reinvesting in your business as fast as your assets wear out.
Is there a simpler accounting framework for small companies?
Qualifying small companies can choose SFRS for Small Entities, a simpler framework based on the International Financial Reporting Standard for Small and Medium-sized Entities. Annual revenue of S$10 million or less is one of the size tests, so check with your accountant whether your company qualifies.
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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.