What are assets?

Assets , also known as holdings , are all financial resources that a business controls and that are expected to provide future economic benefits. Assets make up the left side of the accounting equation and are fundamental to understanding a business's financial position. Properly recording and tracking assets requires systematic bookkeeping to ensure accurate documentation of all assets.

Section 1: Definition and Basic Principles

1.1 What Qualifies as Assets?

For something to be classified as an asset, it must meet three basic criteria:

• Control: The company must have control over the resource as a result of past events
• Future economic benefits: The resource must be expected to contribute to future cash flows
• Reliable measurement: The value must be able to be measured reliably

1.2 Assets in the Accounting Equation

Assets are the first component of the fundamental accounting equation:

Assets = Liabilities + Equity

This means that all assets in the company are either financed through debt (loans) or equity (owner contributions and retained earnings).

Section 2: Classification of Assets

Assets are primarily classified into two main categories based on how long the company plans to keep them:

2.1 Fixed assets (Non-current assets)

Fixed assets are assets that your business plans to keep for more than one year and that are used in its ongoing operations. For an in-depth explanation of all aspects of fixed assets, see our comprehensive guide.

Tangible fixed assets

• Buildings and sites: Offices, factories, warehouses
• Machinery and equipment: Manufacturing equipment, computers, furniture
• Means of transport: Company cars, lorries, forklifts

Intangible Fixed Assets

• Goodwill: Added value from the acquisition of other companies
• Patents and licenses: Rights to technology or products
• Software: Specialized computer systems and applications
• Trademarks: Registered brand names and logos

Intangible assets are treated differently than tangible assets in terms of their value decreasing over time. Instead of depreciation, amortization is used to spread the cost of intangible assets over their economic life.

Financial Fixed Assets

• Long-term investments: Shares in other companies
• Bonds: Long-term interest-bearing securities
• Loans to affiliated companies: As shareholder loans from AS

2.2 Current assets

Current assets are assets that are expected to be converted to cash or consumed within one year.

Inventory

• Raw materials: Materials to be used in production
• Goods in progress: Semi-finished products
• Finished goods: Products ready for sale

Claims

• Accounts receivable: Money owed by customers for goods/services delivered (see debtor )
• Other receivables: Prepaid costs, deposit
• Tax receivables: Receivables from the tax authorities

Short-term investments

• Bank deposits : Cash in company bank accounts
• Short-term securities: Investments that can be sold quickly

Section 3: Valuation of Assets

Asset valuation follows specific accounting principles that ensure consistency and comparability. For a deeper understanding of valuation methods and their practical application, see our comprehensive guide to balance sheet valuation .

3.1 Historical Diet Principle

Most assets are valued at historical cost , which is the original acquisition cost adjusted for:

• Accumulated depreciation (for fixed assets)
• Write-downs (if the value has fallen permanently)
• Write-ups (in special cases)

3.2 Fair Value

Certain assets, particularly financial instruments, can be valued at fair value (market value):

Asset type	Valuation method	Example
Buildings	Historical cost - depreciation	Office purchased for 5 million, depreciated 1 million = 4 million.
Accounts receivable	Nominal value - loss provision	Claim 100,000, risk of loss 5% = 95,000
Shares (outstanding)	Fair value	Listed shares at today's price
Inventory	Lower of cost and net selling price	Goods purchased for 50,000, can be sold for 45,000 = 45,000

When valuing and presenting assets, it is important to follow consistent rounding principles to ensure clarity and comparability in the accounts.

Section 4: Depreciation and Impairment

4.1 Depreciation of Fixed Assets

Depreciation spreads the cost of a fixed asset over its useful life. This reflects the gradual loss of value of the asset through use and age.

For a complete guide to depreciation methods, calculations, and tax rules, see our detailed article on depreciation in accounting .

Common Depreciation Methods

Straight-line depreciation (most common):

 Årlig avskrivning = (Anskaffelseskost - Restverdi) / Brukstid

Example: A machine costs 500,000 NOK, has an expected useful life of 10 years and a residual value of 50,000 NOK.

 Årlig avskrivning = (500.000 - 50.000) / 10 = 45.000 kr per år

Depreciation rates in Norway

Asset type	Typical depreciation rate	Maximum rate (tax)
Office machines	20-30%	30%
Passenger cars	20-25%	25%
Buildings	2-5%	4%
Computer equipment	30-50%	50%

4.2 Write-downs

If the value of an asset permanently falls below its book value, it must be written down . This can be done by:

• Technological developments that make the asset obsolete
• Market changes that reduce value
• Physical damage or deterioration

Section 5: Assets on the Balance Sheet

In the balance sheet, assets are presented on the left-hand side, or top, organized by liquidity (how easily they can be converted to cash). Assets make up one side of the fundamental accounting equation and show all the financial resources that the business controls. For a comprehensive explanation of the structure of the balance sheet and how assets fit into the overall picture, see our article What is the Balance Sheet in Accounting? .

For an in-depth understanding of all aspects of accounting and balance sheet analysis, including asset valuation, accounting principles, and practical balance sheet management, we recommend our detailed guide to balance sheet accounting .

For more on how the balance sheet is prepared at the end of the year, see our guide on the closing balance sheet .

5.1 Typical Balance Sheet Layout for Assets

 AKTIVA

 ANLEGGSMIDLER
 Immaterielle eiendeler
 - Goodwill 500.000
 - Programvare 200.000
 Sum immaterielle eiendeler 700.000

 Varige driftsmidler
 - Bygninger 2.500.000
 - Maskiner og utstyr 1.200.000
 - Transportmidler 300.000
 Sum varige driftsmidler 4.000.000

 Finansielle anleggsmidler
 - Investeringer i aksjer 150.000
 Sum finansielle anleggsmidler 150.000

 SUM ANLEGGSMIDLER 4.850.000

 OMLØPSMIDLER
 Varer
 - Råvarer 400.000
 - Ferdigvarer 600.000
 Sum varer 1.000.000

 Fordringer
 - Kundefordringer 800.000 
- Other receivables 100,000
 Total receivables 900,000

 Bank deposits and cash 500,000

 TOTAL CURRENT ASSETS 2,400,000

 TOTAL ASSETS 7,250,000

Section 6: Practical Examples and Accounting

6.1 Purchase of Fixed Assets

Example: The company purchases a new machine for 300,000 NOK + 75,000 NOK in VAT.

Accounting:

 Debet: Maskiner og utstyr 300.000
 Debet: Inngående MVA 75.000
 Kredit: Leverandørgjeld 375.000

6.2 Monthly Depreciation

If the machine is depreciated over 10 years (straight-line):

 Månedlig avskrivning = 300.000 / (10 × 12) = 2.500 kr

Accounting every month:

 Debet: Avskrivninger 2.500
 Kredit: Akkumulerte avskrivninger 2.500

6.3 Sale of Accounts Receivable

Example: The company sells goods for 100,000 NOK + 25,000 NOK VAT on credit.

Accounting:

Debet: Kundefordringer 125.000
 Kredit: Salgsinntekter 100.000
 Kredit: Utgående MVA 25.000

Section 7: Assets and Financial Analysis

7.1 Key figures for Assets

Assets are used in several important financial metrics:

Key figures	Formula	What it measures
Orbital speed	Turnover / Average total capital	How effectively assets generate sales
Liquidity ratio 1	Current assets / Short-term liabilities	Ability to pay short-term debt
Liquidity ratio 2	(Current assets - Goods) / Current liabilities	Liquidity without selling inventory
Working capital	Current assets - Short-term liabilities	The company's short-term financial health
Equity ratio	Equity / Total assets	How much of the assets are owner-financed

7.2 Asset Composition and Risk

The composition of assets affects the company's risk profile:

• High proportion of fixed assets: Less flexibility, but stable operations
• High proportion of current assets: More flexibility, but potentially lower returns
• High proportion of accounts receivable: Credit risk and liquidity challenges

Section 8: Norwegian Accounting Rules for Assets

8.1 Accounting Act and Good Accounting Practice

Norwegian companies must follow the Accounting Act and generally accepted accounting principles when accounting for assets. Important principles include:

• The precautionary principle: Don't overvalue assets
• The principle of comparability: Consistent treatment over time
• The principle of materiality: Focus on what influences decisions

8.2 Differences between Accounting and Tax Rules

There may be differences between how assets are treated for accounting and tax purposes:

Area	Accounting	Tax-wise
Depreciation	Based on actual usage time	Maximum rates in the tax law
Write-downs	When the decline in value is permanent	Stricter documentation requirements
Write-ups	Allowed in certain cases	Generally not allowed

Section 9: Digitalization and Modern Asset Management

9.1 Automation of Asset Registration

Modern accounting systems offer automation of asset management:

• Automatic depreciation calculation based on predefined rules
• Integration with purchasing systems for automatic registration of new assets
• Notification of maintenance needs and replacement of fixed assets

9.2 Digital Assets

With digitalization, new types of assets have emerged:

• Cryptocurrency: Digital currencies such as Bitcoin
• Digital rights: Domain names, digital licenses
• Data and Algorithms: Valuable Datasets and AI Models

Section 10: Practical Advice for Asset Management

10.1 Best Practices

• Regular inventory: Check physical assets at least annually
• Documentation: Keep track of receipts and contracts
• Insurance: Ensure adequate insurance cover
• Maintenance: Scheduled maintenance extends the lifespan
• Reconciliation : Regular reconciliation of asset accounts against external sources ensures accuracy

10.2 Common Mistakes to Avoid

• Forgetting depreciation: Can lead to overvalued assets
• Don't write down worthless assets: Gives a misleading picture
• Mixing operating and investment expenses: Affects the income statement
• Lack of documentation: Problems during audit or tax inspection

Conclusion

Assets are the cornerstone of any business's finances and a fundamental part of accounting . Understanding how assets are classified, valued and accounted for is essential for:

• Business leaders: To make informed investment decisions
• Investors: To assess the company's financial health
• Accountants: To ensure correct reporting
• Lenders: To assess security and repayment ability

By following established accounting principles and staying up to date with regulatory changes, companies can ensure that their asset management contributes to long-term success and financial stability.

For more information on related topics, see our articles on trial balance and share capital .