Fixed Asset

A Fixed Asset refers to a long-term tangible asset that a company purchases and uses in its operations to generate income, and which is not expected to be consumed, sold, or converted into cash within a single financial year. These are also commonly known as capital assets or property, plant, and equipment (PP&E).

Fixed assets are essential for core business operations, providing infrastructure, operational capability, or production capacity over several years. Common examples include:

• Land and buildings

• Machinery and equipment

• Vehicles

• Office furniture and fixtures

• IT infrastructure (in certain cases)

On the balance sheet, fixed assets are recorded at their original purchase cost, including any associated expenses required to bring the asset to its usable state (such as transportation, installation, or legal fees for property acquisition). Over time, these assets depreciate (except land), and their book value is adjusted accordingly.

Depreciation represents the systematic allocation of an asset’s cost over its useful life, reflecting wear and tear, obsolescence, or market value reduction. Depreciation methods can vary — such as straight-line, declining balance, or units of production — but the purpose is to match the asset’s cost with the revenue it helps generate over time.

In markets like the UAE, companies must also manage fixed asset registers for accounting, tax reporting, and insurance purposes, especially in industries like manufacturing, logistics, and real estate, where fixed assets often represent significant capital investments.