Tangible Fixed Assets: What are they and what is their scope?
Tangible fixed assets (TFA) are long-term tangible assets associated with investment activity, but which are held for use within the scope of operational activity. The primary reason for classifying an asset as an AFT is its holding for use over a significant period of time in carrying out operational activity. It is therefore important to highlight two characteristics, namely: - use, since AFTs are held either for use in the production or supply of goods or services, or for leasing to third parties or for administrative purposes; - and the reporting period, as use must occur over more than one reporting period. The purpose of use alone is not sufficient to classify an asset as an AFT. This means that it is also necessary for this use to occur over more than one reporting period. If an asset is acquired for use during only one reporting period, its economic benefits will be fully recovered immediately and there is no value possible to be obtained in future periods. Therefore, this asset does not meet the definition of an asset and will be immediately recognized as an expense for the period.
Common examples of AFT are buildings, equipment and machines, vehicles, land, furniture, computers, servers and other devices necessary for the activity to the extent that they are held for use for more than the reporting period. However, these assets are classified as AFT because, as the name suggests, their nature is tangible, that is, they have physical substance. Otherwise they would be classified as intangible assets. For example, a trademark is an asset held for use in the supply of goods or services for more than one reporting period, but as it has no physical substance it is not considered an AFT, but rather classified as an intangible asset.
The main aspects to consider when accounting for AFT are its recognition and measurement. They are recorded in the Balance Sheet and depreciated over time, reflecting their loss of economic value throughout their useful life.
AFT are treated autonomously in Accounting and Financial Reporting Standard 7. This standard is based on the International Accounting Standard IAS 16 – AFT, adopted by the original text of Commission Regulation (EC) no. 1126/2008, of 3 November.
The Accounting and Financial Reporting Standards (NCRF) are part of the Portuguese accounting system. These standards have the function of guiding the preparation and presentation of financial statements in Portugal, following internationally recognized accounting principles.
