What Is Fixed Assets? Understand the Importance and How to Manage Them

Many people come across the term “fixed assets" in important situations, whether dealing with accounting issues, managing a company, or trying to better understand a business's resources. Knowing what this type of asset is and how it works can be crucial for making informed decisions and maintaining a clearer view of long-term assets and assets.

In this article, we'll explore the concept of fixed assets, their main characteristics, and why they're so important to businesses. You'll understand how these assets are accounted for, how depreciation affects their value, and best practices for managing them.

What is Fixed Assets?

Fixed assets are tangible assets that a company owns and uses in its operations for a long period of time, with no intention of selling them in the short term. These assets are essential to the business's operation and represent a significant portion of the company's equity.

Therefore, by understanding what makes up a company's fixed assets, it is possible to have a clearer view of its resources and what it uses to operate daily.

Main Characteristics of Fixed Assets

For an asset to be considered a fixed asset, it must have specific characteristics. Check out the main ones below:

• Extended service life: fixed assets are durable goods, used by the company for several years, without the intention of being discarded in the short term.
• Essential for operations: these assets are used in the company's day-to-day operations, contributing to its core activities and revenue generation.
• Not for sale: unlike products or goods, fixed assets are not acquired for the purpose of being sold; they are for the company's own use.

Additionally, it is important to understand how fixed assets differ from other types of assets:

• Current assets: these are the assets and rights that the company intends to transform into cash in the short term, such as inventory and accounts receivable.
• Intangible assets: unlike fixed assets, they are not physical; they represent values such as patents and trademarks that, although intangible, have great value to the company.

These differences help to understand the unique role of fixed assets: they are tangible, durable, and vital to the daily functioning and stability of the business.]

How important are fixed assets for a company?

Fixed assets represent a fundamental part of the equity structure of a company. They not only make up the value of equity but also reflect the resources that support daily operations. This type of asset is an indicator of stability and investment capacity, directly contributing to the company's value and credibility in the market.

Furthermore, fixed assets are crucial for the productivity and growth of the business. Equipment, real estate, and vehicles, for example, allow the company to carry out its activities efficiently and expand when necessary. Without these assets, operations would be compromised, and the company's growth would be limited. Therefore, fixed assets are more than just investments: they are the foundation for business continuity and growth.]

Practical Examples of Fixed Assets in Different Sectors

To better understand the role of fixed assets, let's look at examples of how they are applied in various sectors. Below are some of the main fixed assets used in different types of businesses:

• Industry:
  • Production Machinery and Equipment: essential for manufacturing products and keeping the production line running.
  • Transport Vehicles: used to distribute products or to move materials internally.
  • Industrial Land and Buildings: where manufacturing operations and storage of raw materials take place.
• Business:
  • Commercial Real Estate: stores, offices and warehouses that house the sales and inventory structure.
  • Service Furniture and Equipment: shelves, counters, computers and cash registers, essential for store operations and customer service.
  • Delivery Vehicles: used to transport products to customers or branches.
• Services:
  • Technological Equipment: computers, licensed software and communication equipment that assist the team in providing support and services.
  • Properties for Operation: offices, call centers and service locations.
  • Work Vehicles: cars, vans or other vehicles used to transport employees or to travel to the customer's location.

Depreciation vs. Fixed Assets

Depreciation is an essential concept when we talk about fixed assets, as it is the loss of value of these assets over timeThis reduction in value occurs naturally due to the use, wear, and aging of assets. For example, an industrial machine that is used daily or a delivery vehicle that travels long distances tends to lose value over the years, even if they are still in good working condition.

There are different methods for calculating depreciation, the most common being:

• Linear Method: The loss in value is distributed equally over the asset's useful life. For example, if a machine costs R$ 100,000 and has an estimated useful life of 10 years, the annual depreciation would be R$ 10,000 (100,000 ÷ 10 years).
• Hours of Use Method: Depreciation is calculated based on the number of hours the asset was used. This method is ideal for assets with varied uses, such as industrial machinery. For example, if the value of the machinery is R$ 50,000 and its useful life is estimated at 10,000 hours, the depreciation would be R$ 5 per hour of use (50,000 ÷ 10,000 hours).

How to Manage Fixed Assets Well

Managing fixed assets is a constant challenge for companies, which need to ensure that these assets are always in good condition and contribute to productivity. maintenance and updating of these assets are fundamental, as an outdated or poorly maintained asset can generate extra costs and compromise the efficiency of operations.

Here are some practical tips for good management of fixed assets:

• Plan Preventive Maintenance: Performing regular maintenance prevents unexpected problems and extends the useful life of assets. Establish a schedule for inspections and repairs based on the specifications of each asset.
• Track Depreciation: Keep track of each asset's depreciation on the balance sheet. This not only helps reflect the updated value of assets but also aids in planning future replacements.
• Implement an Asset Control System: Use management tools that allow detailed tracking of each asset, with records of location, condition, maintenance dates, and book value. Digital systems facilitate asset visualization and management.
• Periodically Review the Need for Replacement: Some assets may become obsolete over time. Periodically evaluate whether replacing a particular asset would increase productivity or reduce operating costs.
• Empower Staff to Use Assets Properly: Ensuring employees know how to operate assets correctly reduces the risk of damage and improves durability. Invest in training for the proper and safe use of equipment.

The Importance of Having Knowledge about Fixed Assets

Understanding what fixed assets are and how they work is essential for anyone involved in a company's financial or strategic management. This knowledge allows for more informed decisions about the acquisition, maintenance, and eventual replacement of assets that support the business's daily operations.

When a company knows how to value and manage its fixed assets well, it not only preserves its assets but also ensures efficiency and continuity in operations.

Furthermore, understanding the impact of depreciation and the costs associated with fixed assets helps maintain more accurate and transparent accounting. This facilitates long-term financial planning and strengthens the company's market position, making it more attractive to investors and partners.

With a clear view of these assets, the company can plan its growth and take steps to maintain its competitiveness and sustainability in the future.