What Does Tangible Asset Mean?
A tangible asset is a physical property that has value. Such an asset can be seen and touched by anyone. From a company's perspective, this type of asset is available for the use of a company and is not for sale to customers.
A tangible asset may also be known as a hard asset or real asset.
Divestopedia Explains Tangible Asset
Tangible assets are classified based on their properties, such as reproducible or non-reproducible, depending on the nature of its use. In this case, buildings or machinery are reproducible assets because they can be used to produce specific products. On the other hand, non-reproducible assets are those that cannot be used for the direct production of any product and examples of such assets include land or a piece of art work.
From an accounting perspective, tangible assets receive special treatment. When a company uses these assets for more than one year, a process called depreciation is used to divide the expense of the asset across its useful lifespan. For example, if the value of an asset is $50,000 and its useful lifespan is 10 years, then the company can claim a depreciation of $5,000 for each year. This depreciation allows for certain accounting and tax benefits for the company.
Tangible assets are opposite to intangible assets which cannot be seen or felt. Examples of intangible assets include copyright, brand recognition, goodwill and patents. All companies have a combination of both tangible and intangible assets as part of their business assets. These items are not available for sale to its customers.
In the case of companies that engage in the sale of fixed items, such as land, these items are viewed as the product of the company and not its assets; therefore, they do not appear in a company's balance sheet.