Is land a current asset?
/What is Land?
Land is real estate that is exclusive of any buildings or other assets situated on the property. Depending on the terms of a land ownership agreement, the owner may be awarded the right to use all natural resources on and under the land, which may include water rights, fishing rights, mining rights, and so forth.
Is Land a Current Asset or Long-Term Asset?
Land is a fixed asset, which means that its expected usage period should exceed one year. Since assets are only included in the current assets classification if there is an expectation that they will be liquidated within one year, land should not be classified as a current asset. Instead, land is classified as a long-term asset, and so is categorized within the fixed assets classification on the balance sheet. The balance sheet is one of the financial statements, and summarizes an organization’s assets, liabilities, and shareholders’ equity as of a specific point in time.
Land is considered to be the longest-lived asset, since it cannot be depreciated, and so has an essentially eternal useful life. The only exception is when natural resources are being extracted from land, in which case the expected depletion period for the resource extraction could be considered the life of the land asset.
Related AccountingTools Courses
FAQs
Can Land be Reclassified as a Current Asset?
land can be reclassified as a current asset if management intends to sell it within the company’s normal operating cycle or within one year. In such cases, it is reported under "assets held for sale" rather than as a fixed asset. This reclassification is only appropriate when the sale is highly probable and the land is available for immediate sale in its present condition.
Related Articles
How to Account for Land Improvements