Why the UK Public Sector Is Moving from Fixed Assets to Non Current Assets

Moving to Non-current Assets in the UK Public Sector: A Subtle but Important Shift

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Vicky Stanley is a Fixed Asset Accounting specialist with over 20 years’ experience helping organisations improve control, accuracy, and compliance across their fixed asset portfolios.

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On a recent government project focused on Fixed Asset Management, one detail stood out early on.

There was no “Fixed Assets” workstream. Instead, the programme was structured around a “Non Current Assets” workstream.

The scope of the work had not changed. The same assets, resources, and equipment were being managed. However, the terminology had shifted from fixed assets to non current assets.

This reflects a broader shift across the UK public sector. The term non current assets is now more commonly used in financial statements and on the balance sheet, particularly following IFRS 16 and changes to lease accounting.

Understanding the difference between fixed assets and non current assets is increasingly important for accounting, reporting, and assessing financial position.

What Are Non Current Assets?

Non current assets, also referred to as long term assets, are resources that a business owns and expects to use for more than one year. These assets are not intended for sale in the normal operating cycle and are not classified as current assets.

Non current assets are recorded on the company’s balance sheet and represent long term investments that support day to day operations and generate economic benefits over time.

Unlike current assets such as cash, cash equivalents, inventory, accounts receivable, prepaid expenses, and short term investments, non current assets are not easily converted into cash within less than a year.

Types of Non Current Assets

Non current assets typically fall into three major categories for accounting purposes.

• Tangible assets: Physical assets such as property, plant and equipment, vehicles, and office furniture
• Intangible assets: Non-physical assets such as intellectual property, software, patents, and brand value
• Financial assets: Long term investments such as bonds, securities, and other investments held for more than an accounting year

These assets form the long term resource base of a business and are essential for generating future value and supporting services.

Fixed Assets vs Non Current Assets

The difference between fixed assets and non current assets is largely one of classification.

Fixed assets are a type of non current asset and usually refer to tangible assets such as property, equipment, and machinery that a company owns and uses in its operations.

Non current assets include fixed assets but also include intangible assets and long term financial investments.

In practice, the term fixed assets is still widely used in asset registers and operational systems, while the term non current assets is used in financial reporting and on the balance sheet.

Why Non Current Assets Are Increasingly Used

1. Balance Sheet Structure

Modern accounting frameworks structure the balance sheet around current assets and non current assets.

Non current assets can appear above or below current assets on the company’s balance sheet and represent long term value, while current assets such as cash, inventory, and accounts receivable represent short term resources.

2. IFRS 16 and Lease Accounting

IFRS 16 introduced right-of-use assets and lease liability recognition.

Under this model, lease payments and right of use assets are recognised alongside a lease liability, with the underlying asset recorded as a non current asset.

This means that assets which were previously off the balance sheet are now included within non current assets, increasing the importance of the term.

3. Consistency Across Financial Statements

Using non current assets ensures consistency across financial statements, financial position reporting, and accounting disclosures.

This alignment supports audit, reporting, and assessment of liabilities and long term investments.

How Non Current Assets Appear on the Balance Sheet

On the balance sheet, non current assets are listed separately from current assets.

Typical non current asset categories include property, plant and equipment, intangible assets, long term investments, and right of use assets.

These are reported alongside financial liabilities and other liabilities to provide a complete view of the company’s financial position.

The presence of non current assets on a company’s balance sheet indicates long term investment and the ability to generate returns over time.

Depreciation and Value of Non Current Assets

Depreciation is applied to fixed assets and other non current assets to reflect the reduction in value over their useful life.

Depreciation is recorded as an expense and reduces the book value of assets over time.

The book value of non current assets is calculated by subtracting accumulated depreciation from the purchase price or gross book value (GBV).

This ensures that the full value of an asset is spread across its useful life rather than being treated as a single expense.

For example, office furniture, equipment, and property are depreciated over several accounting years.

Non Current Assets and Business Stability

Non current assets are essential for long term business stability.

They represent investments in infrastructure, resources, and capital expenditure that support operations and generate economic benefits.

A strong base of non current assets indicates that a business has the capacity to generate future cash flow and sustain its operations.

These assets are critical for assessing financial health, long term investments, and overall value.

Where Confusion Arises in Practice

Many organisations still use the term fixed assets in day to day operations, while financial statements refer to non current assets.

This creates a difference in terminology between systems and reporting.

For example, a fixed asset register may track fixed assets and right of use assets, while the balance sheet presents those same assets under a non current assets heading, with subheadings for property, plant and equipment and right of use assets.

This difference can lead to confusion, particularly when reconciling financial data.

What Has Not Changed

The core principles of asset management remain unchanged.

Businesses still need to track assets, manage depreciation, assess value, and ensure accurate accounting records.

Assets continue to support day to day operations and generate long term value.

Practical Implications for Organisations

Organisations need to ensure alignment between asset registers, accounting systems, and financial reporting.

This includes correctly classifying assets, managing depreciation, and reflecting lease liability and lease payments accurately.

Software systems increasingly support this by linking operational asset data with financial statements.

Closing Perspective

The shift from fixed assets to non current assets is not a change in the assets themselves, but a change in the terminology being adopted and how those assets are reported.

Non current assets provide a clearer structure for modern accounting, particularly as businesses manage a wider range of assets, including intangible assets, right of use assets, and long term investments.

Understanding this shift helps organisations improve reporting, assess financial position, and maintain consistency across financial statements.

Frequently Asked Questions About Non Current Assets

What are non current assets and how do they differ from current assets?

Non current assets are long term resources that a business owns and expects to use for more than one year. These assets appear on the balance sheet below current assets and support day to day operations over the long term.

Current assets such as cash, cash equivalents, inventory, and accounts receivable are expected to be converted into cash within less than a year, while non current assets provide longer term value and are not part of the normal operating cycle.

Are fixed assets the same as non current assets?

Fixed assets are a type of non current asset and typically include tangible assets such as property, equipment, and office furniture that a company owns and uses in its operations.

Non current assets is a broader category that also includes intangible assets and financial assets such as long term investments. This is why financial statements and the company’s balance sheet often use the term non current assets rather than fixed assets.

What types of assets are included in non current assets?

Non current assets include tangible assets like property, equipment, and vehicles, as well as intangible assets such as intellectual property, patents, trademarks, and goodwill.

They also include most leased assets and financial assets such as long term investments in stocks, bonds, and real estate, along with natural resources where a business is directly involved in extraction.

These assets are essential resources that help a business generate returns and long term economic benefits.

How are non current assets recorded on the balance sheet?

Non current assets are recorded on the balance sheet rather than treated as an immediate expense. This allows the cost of the asset to be recognised over time and provides a more accurate view of financial position and performance.

This approach ensures that large investments do not distort the company’s balance sheet in a single accounting year.

How does depreciation affect non current assets?

Depreciation applies to fixed assets, which are a type of non current asset, and to tangible, intangible, and right of use assets. It is recorded as an expense on the income statement. It reduces the value of assets over their useful life and reflects wear and usage.

Depreciation helps a company avoid a major loss on its balance sheet when it makes a fixed asset purchase by spreading the cost over many years. This improves financial reporting and supports more stable profitability.

The depreciation of non current assets directly impacts net income and overall financial performance.

How is the book value of non current assets calculated?

The book value of non current assets is calculated by subtracting accumulated depreciation or amortisation from the original purchase price or revalued gross book value.

Net non current assets can then be calculated by subtracting accumulated depreciation and any impairments from total non current assets. This provides a more accurate representation of the current value of assets on the balance sheet.

What depreciation methods are commonly used?

The Straight Line Depreciation Method divides the depreciable value of an asset by its useful life, resulting in equal depreciation entries each year.

Other methods may also be used depending on accounting requirements. FMIS Fixed Assets supports, amongst many others, straight line, declining balance, and MACRS depreciation methods.

The choice of method affects how expense is recognised and how asset value reduces over time.

Why are non current assets important for business stability?

Non current assets are critical for long term stability because they represent investments in infrastructure, equipment, and resources that support operations.

High levels of investment in non current assets often indicate a focus on future growth and increasing overall business value. These assets contribute to the company’s ability to generate future cash flow and sustain services.

They also provide insight into capital expenditure, long term investments, and the strength of the company’s balance sheet.

Do intangible assets play a significant role?

Yes. Intangible assets lack physical substance but provide significant economic value. Examples include intellectual property, software, brand recognition, and goodwill.

These assets can deliver strategic and financial benefits over time and are an important component of non current assets in modern organisations.