Definition: Tangible assets are physical, measurable resources; like property, plant, and equipment, used in a company’s operations to produce a profit. These assets include anything with a physical nature that is used within a company.
What Does Tangible Assets Mean?
What is the definition of tangible asset? These resources can be divided into two main categories: current and fixed. Current assets are resources that will be consumed in the current period like inventory. Fixed assets are long-term resources that will provide value for future periods to come. Some examples include machinery, vehicles, and buildings.
These resources can be damaged, repaired, stolen, and purchased because they are real items that get used in the normal course of business. Management must ensure these resources are guarded and maintained properly in order to preserve their usefulness. Tangibles can also used as collateral for loans.
All tangibles are reported on the balance sheet at their historical cost, but some have special reporting requirements. Long-term fixed assets must be depreciated over their useful lives with the accumulated depreciation reported on the front of the balance sheet.
Assets without physical characteristics, on the other hand, are labeled intangible assets. These resources are not as easily valued and can increase or decrease in value over time. Some examples of these assets include patents, trademarks, and investments.
Let’s take a look at an example.
Example
Let’s look at Marsha’s Studio. Marsha’s tangibles in her studio consist of cameras, lighting equipment, a building, photo printers, and canvases. All of these are physical items and can be easily seen, touched, and counted during their use in the business operations.
Marsha would record these items on her balance sheet at their historical cost and depreciate the fixed assets like the building and camera equipment.
Now let’s say the photography studio has a contract with a wedding planner stating that all weddings will be shot using this photography studio. The value of this contract is not clear at the moment. This is an intangible asset because it isn’t physical in nature. It’s simply a legal agreement.
Summary Definition
Define Tangible Assets: Tangible asset means a physical resource like cash, land, buildings, and machinery.
