Plant assets definition
/What are Plant Assets?
Plant assets are a group of assets used in an industrial process, such as a foundry, factory, or workshop. These assets are classified as fixed assets if their cost exceeds the capitalization threshold of a business, and they are expected to be used for more than one reporting period. Otherwise, they are charged to expense as incurred. Any asset may be included in the plant assets classification, as long as it contributes to the generation of sales.
Plant assets must also be reviewed for impairment at regular intervals. This classification is rarely used, having been superseded by such other asset classifications as Buildings and Equipment.
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Types of Plant Assets
Plant assets generally fall into three main classifications, which are buildings, equipment, and land. Here are some examples of these asset types:
Machinery. Machinery includes equipment like lathes, milling machines, and conveyor systems used directly in the manufacturing process. These assets are vital for transforming raw materials into finished products and are depreciated based on their useful life and wear.
Manufacturing equipment. Specialized equipment such as welding machines, presses, and injection molding machines fall under this category. These tools are designed for specific tasks within the production line, enhancing efficiency and product quality.
Factory buildings. The physical structures where manufacturing and assembly take place are considered plant assets. This includes the main production floor, storage areas, and administrative offices within the facility. The cost of factory buildings is capitalized and depreciated over several decades.
Industrial robots. Used in automated production lines, industrial robots perform tasks like welding, assembling, and packaging with high precision. These assets improve production speed and consistency but involve significant upfront investment and maintenance costs.
Power generators. Backup or primary power generators ensure uninterrupted production during power outages. These assets are critical for minimizing downtime and maintaining continuous manufacturing operations.
Production tools and dies. Custom tools, molds, and dies used for shaping, cutting, or forming products are classified as plant assets. These items are essential in industries like automotive and aerospace manufacturing, where precision and consistency are crucial.
HVAC systems. Heating, ventilation, and air conditioning systems in factories help maintain appropriate temperatures and air quality for both workers and equipment. These systems are capitalized as plant assets due to their long-term utility and significant cost.
Forklifts and material handling equipment. Equipment such as forklifts, pallet jacks, and cranes used to move raw materials and finished products within the facility are plant assets. Efficient material handling minimizes bottlenecks and supports smooth production flows.
Industrial furnaces and kilns. Used in industries like metalworking and ceramics, these assets provide the high temperatures needed for processes such as smelting and glazing. They represent significant capital investments and require regular maintenance.
Storage tanks and silos. Large containers used for storing raw materials like grains, chemicals, or liquids are considered plant assets. Proper storage ensures the availability of raw materials as needed and prevents production delays.
These examples illustrate the diversity of plant assets and their importance in supporting efficient, continuous, and high-quality manufacturing operations.
Depreciation of Plant Assets
Plant assets are depreciated over their useful lives. The only exception is land, which cannot be depreciated.
Presentation of Plant Assets
Plant assets are reported within the property, plant, and equipment line item on the reporting entity’s balance sheet, where it is grouped within the long-term assets section. The presentation may pair the line item with accumulated depreciation, which offsets the reported amount of the asset.