Fixed Asset Management Glossary
Clear, plain-English definitions of the fixed asset management terms used every day by finance and accounting teams. Use the A–Z or the categories below to jump straight to a term.
Core Terminologies
Accumulated Depreciation
The total depreciation charged against a fixed asset since it was first brought into use. It is recorded as a contra-asset, reducing the asset’s original cost on the balance sheet. Original cost minus accumulated depreciation gives the asset’s net book value.
Asset Disposal
The removal of a fixed asset from the register when it is sold, scrapped, donated or written off. The process records any profit or loss on disposal, the difference between the sale proceeds and the asset’s net book value, then clears the cost and accumulated depreciation from the accounts.
Asset Lifecycle
The full sequence of stages a fixed asset moves through, from procurement and capitalisation, through deployment, maintenance and depreciation, to eventual disposal. Tracking the lifecycle helps organisations forecast replacement costs, control maintenance spend, and keep the asset register accurate.
Asset Register
A central record of every fixed asset an organisation owns or controls. A complete register holds details such as description, location, purchase date, cost, depreciation method, net book value, and unique tag number. It is the foundation of accurate financial reporting, audit, and asset control.
Asset Tagging
The practice of attaching a unique identifier, usually a barcode, QR code or RFID tag, to a physical asset. Tagging links the item to its record in the asset register, which speeds up audits, reduces ghost assets, and gives each asset a verifiable identity throughout its life.
Barcode Tracking
A method of identifying assets using printed barcode labels read by a handheld or mobile scanner. Each scan retrieves or updates the asset’s record. Barcodes are inexpensive and reliable, though they need line of sight and individual scanning, which makes them slower than RFID across large estates.
Capital Expenditure CapEx
Money spent acquiring, upgrading or extending the life of fixed assets such as buildings, machinery, vehicles and IT equipment. It is recorded on the balance sheet and depreciated over the asset’s useful life, rather than charged in full to profit and loss in the year of purchase.
Capitalisation Threshold
The minimum value an item must reach before it is recorded as a fixed asset and depreciated, rather than expensed immediately. Each organisation sets its own threshold in line with its accounting policy. Items below it are treated as day-to-day costs to keep the register manageable.
Componentisation
Also called component accounting. It splits a single asset into separate parts that are depreciated individually because they have different useful lives. A building, for example, might separate its structure, roof and heating system. The approach gives a more accurate depreciation charge and reflects how parts are replaced.
Depreciation
The systematic allocation of an asset’s cost across its useful economic life, reflecting the gradual consumption of its value through use, wear and obsolescence. It spreads the expense over the years the asset earns its keep, rather than charging it all at once. The two most common methods are straight-line and reducing balance.
Finance Lease
A lease that transfers substantially all the risks and rewards of ownership to the lessee, even though legal title may stay with the lessor. The lessee records the asset and a matching liability on its balance sheet. It is the accounting opposite of the traditional operating lease.
Fixed Asset
A long-term, tangible item an organisation owns and uses to run its operations, such as property, plant, machinery, vehicles or equipment. Fixed assets are held for more than one accounting period and are not bought for resale. Their cost is capitalised and depreciated over their useful life.
FRS 102
The main accounting standard for UK and Irish entities that do not report under full IFRS, known as UK GAAP. Following the Financial Reporting Council’s 2024 periodic review, it introduces a new lease model for accounting periods beginning on or after 1 January 2026, bringing most leases on to the balance sheet.
Ghost Asset
A fixed asset still listed in the register but no longer physically present or in use, often because it was lost, stolen, scrapped or moved without an update. Ghost assets overstate the asset base and inflate depreciation, insurance and tax. Regular physical audits are the main way to find and remove them.
IFRS 16
The international accounting standard for leases, effective from 1 January 2019. It requires lessees to recognise almost all leases on the balance sheet as a right-of-use asset and a lease liability, removing the old off-balance-sheet treatment of operating leases. Short-term and low-value leases are exempt.
Impairment
A reduction in an asset’s recoverable amount below its carrying value on the balance sheet, caused by damage, obsolescence, a falling market value or reduced usefulness. When an asset is impaired, it is written down to its recoverable amount and the loss is charged to the profit and loss account.
Lease Liability
The obligation a lessee records for future lease payments, measured at the present value of those payments at the start of the lease. It sits alongside the right-of-use asset on the balance sheet and is required under IFRS 16 and, from 2026, the revised FRS 102.
Net Book Value NBV
The value of a fixed asset in the accounts after depreciation, calculated as original cost minus accumulated depreciation. Also called carrying amount, it shows what the asset is worth on the balance sheet, not what it would sell for. NBV falls each year as depreciation is charged.
Operating Expenditure OpEx
The ongoing, day-to-day cost of running a business, such as rent, utilities, salaries, repairs and consumables. Unlike capital expenditure, it is charged in full to the profit and loss account in the period it occurs and does not create a fixed asset on the balance sheet.
Operating Lease
Traditionally a lease that did not transfer the risks and rewards of ownership and was kept off the lessee’s balance sheet. Under IFRS 16, and the revised FRS 102 from 2026, this off-balance-sheet treatment is removed for lessees, so most operating leases are now recognised as right-of-use assets.
Reducing Balance Method
A depreciation method that applies a fixed percentage to an asset’s net book value each year, so the charge is largest in the early years and shrinks over time. Also called declining balance, it suits assets that lose most of their value soon after purchase, such as vehicles and technology.
Residual Value
The estimated amount an organisation expects to recover from an asset at the end of its useful life, after deducting any disposal costs. Sometimes called salvage value, it is deducted from cost when calculating depreciation, so only the amount the business actually consumes is written off.
Revaluation
An accounting adjustment that restates a fixed asset to its current fair value rather than historical cost. It is used for certain assets, such as property, and any uplift is usually recorded in a revaluation reserve. Once an asset is revalued, the policy must be applied consistently across its class.
RFID Tracking
Radio Frequency Identification uses radio waves to read tags attached to assets without needing line of sight. A reader can capture many tags at once, which makes large-scale audits far faster than barcodes. RFID costs more per tag but suits high-value or high-volume estates where speed and accuracy matter.
Right-of-Use Asset
An asset that represents a lessee’s right to use a leased item over the lease term. It is recognised on the balance sheet under IFRS 16, and under FRS 102 from 2026, then depreciated across the lease term. It is paired with a lease liability for the related payments.
Straight-Line Depreciation
The most common depreciation method, charging an equal amount each year across an asset’s useful life. The annual charge is the asset’s cost minus its residual value, divided by the number of years it is expected to last. It suits assets that deliver steady value, such as buildings and fixtures.
Useful Economic Life
The period over which an organisation expects to use a fixed asset, or the total output it expects to obtain from it. It drives the depreciation charge: a shorter life means a higher annual charge. It is an estimate, reviewed regularly as conditions change.
Fixed asset accounting and depreciation
Indexation
Indexation is the process of adjusting an asset’s recorded value using a recognised price or cost index. It is commonly used by UK public-sector organisations to reflect changes in asset values between formal valuations.
Units of Production Depreciation
Units of production depreciation calculates depreciation according to an asset’s actual use or output rather than the passage of time. The charge may be based on units produced, operating hours, mileage or another measurable activity.
Depreciable Amount
The depreciable amount is the portion of an asset’s value that is allocated as depreciation over its useful life. It is normally calculated as the asset’s cost or revalued amount less its estimated residual value.
Depreciation Start Date
The depreciation start date is the date on which an asset becomes available for use. Depreciation begins when the asset is in the location and condition required for its intended operation, rather than necessarily on its purchase date.
Fully Depreciated Asset
A fully depreciated asset is an asset whose entire depreciable amount has already been charged to expenditure. It may still be operational and should remain recorded in the fixed asset register until it is disposed of or otherwise derecognised.
Asset Class
An asset class is a group of fixed assets with a similar nature or operational use. Common classes include land, buildings, vehicles, plant, machinery and IT equipment.
Asset Category
An asset category is a classification used to organise similar assets within the fixed asset register. Categories can support reporting, depreciation rules, responsibility assignments and management analysis.
Carrying Amount
The carrying amount is the value at which an asset is shown in the accounts. It reflects the asset’s cost or revalued amount after accumulated depreciation, impairment losses and other relevant adjustments.
Derecognition
Derecognition is the removal of an asset’s carrying amount from the balance sheet. It normally occurs when the asset is disposed of or when no further economic benefits or service potential are expected from it.
Recognition Criteria
Recognition criteria are the accounting conditions that expenditure must meet before it can be recorded as a fixed asset. These normally consider whether the asset will provide future benefits or service capacity and whether its cost can be measured reliably.
Subsequent Expenditure
Subsequent expenditure is money spent on an asset after its initial purchase or construction. The expenditure may be capitalised when it enhances the asset, extends its useful life or replaces a significant component; otherwise, it is normally treated as an operating expense.
Capital Work in Progress
Capital work in progress is expenditure on an asset that is still being constructed, developed or prepared for use. It is recorded separately and is not normally depreciated until the completed asset becomes available for operation.
Amortisation
Amortisation is the systematic reduction in the value of an intangible asset (e.g. software or patents) over its useful life. Similar to depreciation, but for intangible assets.
Capital Spend (CapEx)
Capital spend and capex refers to the money spent to acquire, improve, or extend the life of a fixed asset rather than treating it as an operating expense.
Capitalisation
Capitalisation is recording a qualifying expenditure as a fixed asset on the balance sheet instead of expensing it immediately.
Valuation and public-sector asset management
Current Value in Existing Use
Current value in existing use is the value of an operational asset based on its present use by the organisation. It reflects the asset’s value for delivering its current function rather than its value for an alternative use.
Existing Use Value — EUV
Existing use value is an asset valuation based on the assumption that the property will continue to be used for its current purpose. It is commonly applied to operational property where the existing use differs from its highest potential market use.
Depreciated Replacement Cost — DRC
Depreciated replacement cost is a valuation method based on the cost of replacing an asset with a modern equivalent, less deductions for age, condition and obsolescence. It is often used for specialised public-sector assets where there is limited market evidence.
Modern Equivalent Asset — MEA
A modern equivalent asset is a hypothetical modern asset that could provide the same operational capacity as an existing asset. It is used as the starting point when calculating depreciated replacement cost.
Service Potential
Service potential is an asset’s ability to support the delivery of services, whether or not it generates income. The concept is especially relevant to public-sector assets such as hospitals, schools, infrastructure and civic buildings.
Operational Asset
An operational asset is an asset held and used to support an organisation’s activities or service delivery. Examples include offices, hospitals, machinery, vehicles and IT equipment used in day-to-day operations.
Surplus Asset
A surplus asset is an asset that is no longer required for the organisation’s current operational activities. It may be retained temporarily, repurposed, transferred or prepared for disposal.
Asset Held for Sale
An asset held for sale is an asset whose recovery is expected mainly through sale rather than continued use. It must normally be available for immediate sale, with the disposal considered highly probable.
Fair Value
Fair value is the price that would be received to sell an asset in an orderly transaction between knowledgeable market participants. It is a market-based measurement rather than an organisation-specific valuation.
Revaluation Reserve
A revaluation reserve records qualifying increases in the value of fixed assets following revaluation. It forms part of an organisation’s reserves and helps distinguish revaluation gains from normal operating income.
Revaluation Cycle
A revaluation cycle is the planned interval between formal reviews of an asset’s value. Organisations may use periodic professional valuations, annual reviews or indexation between full valuations, depending on the applicable accounting framework.
Rolling Revaluation Programme
A rolling revaluation programme values different sections of an asset portfolio in successive periods. This spreads the valuation workload while ensuring that the overall asset base is reviewed within an established cycle.
Valuation Index
A valuation index is a recognised measure used to estimate changes in asset values over time. Different indices may be selected for buildings, equipment, infrastructure or other asset types.
Re-life
Re-life refers to extending an asset’s expected useful life after a major refurbishment, upgrade, or reassessment, which changes future depreciation.
Asset register management and control
Physical Asset Verification
Physical asset verification is the process of checking that assets recorded in the fixed asset register physically exist and remain in use. It also confirms details such as location, condition, identification number and responsible department.
Asset Audit
An asset audit is a structured review of fixed assets and their associated records. It may examine physical existence, ownership, location, valuation, condition, accounting treatment and supporting documentation.
Asset Reconciliation
Asset reconciliation is the process of comparing the fixed asset register with other sources of information. This commonly includes the general ledger, purchase records, physical audit results and departmental asset lists.
Asset Transfer
An asset transfer is the movement of an asset between locations, departments, cost centres, custodians or legal entities. The fixed asset register should be updated to preserve an accurate history and allocation of responsibility.
Asset Custodian
An asset custodian is the person, team or department responsible for the day-to-day care and control of an asset. Custodianship does not necessarily mean legal ownership of the asset.
Asset Location
An asset location is the physical or organisational place assigned to an asset in the fixed asset register. Accurate location records support audits, transfers, maintenance and accountability.
Asset Number or Unique Asset Identifier
An asset number is a unique reference assigned to an individual asset record. It enables the asset to be identified consistently across the register, labels, reports and related business systems.
Parent and Child Assets
Parent and child assets are linked records used to represent an asset and its associated components or subordinate items. The structure allows related assets to be managed together while retaining separate values, histories or depreciation rules.
Bulk Asset
A bulk asset is a fixed asset record representing a quantity of similar items managed collectively. This approach may be used where individual items are low value but the combined group meets the organisation’s capitalisation policy.
Pooled Asset
A pooled asset is a group of similar assets accounted for and depreciated together as a single pool. Pooling can simplify the management of numerous assets with similar characteristics and useful lives.
Asset Split
An asset split divides one existing asset record into two or more separate records. It may be required following a partial transfer, componentisation, change of ownership or partial disposal.
Asset Merge
An asset merge combines two or more asset records into a single record. It may be used to correct duplicate records or reflect assets that are now managed and accounted for as one item.
Partial Disposal
A partial disposal occurs when only part of an asset is sold, scrapped, transferred or written off. The relevant proportion of the asset’s cost, accumulated depreciation and carrying amount must be removed from the accounts.
Asset Retirement
Asset retirement is the withdrawal of an asset from active operational use. A retired asset may remain in storage or await disposal and should not necessarily be removed from the register immediately.
Asset Write-off
An asset write-off removes all or part of an asset’s remaining carrying amount from the accounts. It may be required when an asset is lost, destroyed, obsolete, damaged beyond use or no longer expected to provide value.
Period Structure
Period structure refers to the accounting periods (e.g. monthly, quarterly, yearly) used to record depreciation, asset movements, and financial reporting.
Capital Accounting
Capital accounting is the process and rules for recording, managing, depreciating, and reporting fixed assets throughout their lifecycle.
Accounting frameworks and standards
Generally Accepted Accounting Principles — GAAP
Generally Accepted Accounting Principles are the recognised accounting rules, standards and conventions used within a particular jurisdiction. The applicable requirements differ between frameworks such as UK GAAP, US GAAP and International Financial Reporting Standards.
UK GAAP
UK GAAP is the financial reporting framework used by organisations preparing accounts under UK accounting standards. It includes standards issued by the Financial Reporting Council, such as FRS 102.
IAS 16 — Property, Plant and Equipment
IAS 16 is the international accounting standard governing the recognition, measurement, depreciation, revaluation and disposal of property, plant and equipment. It applies to many organisations reporting under International Financial Reporting Standards.
IAS 36 — Impairment of Assets
IAS 36 is the international accounting standard governing asset impairment. It requires an asset to be written down when its carrying amount is greater than the amount expected to be recovered through use or sale.
Government Financial Reporting Manual — FReM
The Government Financial Reporting Manual is HM Treasury’s technical accounting guide for UK central government organisations. It applies International Financial Reporting Standards with adaptations and interpretations for the public-sector environment.
CIPFA Code of Practice
The CIPFA/LASAAC Code of Practice sets out the accounting requirements for UK local authorities. It explains how relevant accounting standards should be applied within the statutory and operational context of local government.
Property, Plant and Equipment — PPE
Property, plant and equipment is the formal accounting term for tangible assets held for operational use over more than one reporting period. It commonly includes land, buildings, machinery, vehicles, furniture and equipment.
Component Accounting
Component accounting is accounting for significant parts of an asset separately when they have different useful lives (e.g. a building’s roof and structure). Component accounting is required under IFRS in many cases.
Non-current asset
A non-current asset it a long-term asset expected to be used for more than one year, such as buildings, machinery, vehicles, or software.
Asset Impairment
Asset impairment refers to a reduction in an asset’s carrying value when its recoverable amount falls below its book value due to damage, obsolescence, or other factors.
Put these terms into practice
FMIS fixed asset software helps UK finance and asset teams keep an accurate register, automate depreciation, run barcode and RFID audits, and stay compliant with IFRS 16 and the 2026 FRS 102 lease changes.
Sources and standards. Definitions of the accounting standards above are based on the primary standard-setters. For IFRS 16, see the IFRS Foundation. For FRS 102 and the 2024 periodic review changes effective from 1 January 2026, see the Financial Reporting Council. This glossary is general guidance, not accounting or financial advice.
