“Other assets” is a general ledger account used in a company’s financial reporting to categorize assets that are not specifically listed in other asset categories. The nature of these assets varies widely among different companies, as it typically includes assets that do not fit neatly into the standard categories like cash, accounts receivable, inventory, property, plant and equipment, or intangible assets.
Other assets may include:
- Long-term prepaid expenses: Costs paid in advance for services or benefits to be received in the future, such as prepaid rent or insurance. They are classified as long-term if the benefit period is more than one year.
- Deferred tax assets: They arise when a business has overpaid taxes or taxes paid in advance. These assets are realized on future tax bills.
- Loans to employees or officers: If the company has provided loans to employees or executives, the amount of the loan would be considered an asset.
- Deposits: This could include security deposits for a lease.
- Non-current receivables: These are amounts owed to the company that are not expected to be received within one year.
- Investment in non-consolidated subsidiaries or associated companies.
- Certain intangible assets like patents, copyrights, or goodwill.
Each of these items can be relatively small, so they are grouped together in the “other assets” category on the balance sheet. However, if any of these items grow to be a significant portion of total assets, they should be broken out into a separate line item because of the materiality concept in accounting.
It’s always a good idea to look at the notes to a company’s financial statements if you want to understand what specific items are included in “other assets.”
Example of Other Assets
Let’s consider an example of a company’s balance sheet which contains an “Other Assets” section:
|As of December 31, 2023|
|Property, Plant and Equipment||$5,000,000|
Here, “Other Assets” amounts to $400,000. The nature of these assets would depend on ABC Corporation’s specific operations. If you look at the notes to the financial statements, you might find that these other assets include:
- A long-term prepaid insurance policy: $200,000
- A security deposit for a rented property: $50,000
- A loan to a senior executive: $100,000
- Deferred tax assets: $50,000
The sum of these four items equals the $400,000 listed on the balance sheet as “Other Assets.”
This example shows how “Other Assets” on a balance sheet might comprise a variety of different items. Because each of these is relatively small compared to the company’s total assets, they are grouped together. If any of these items became large enough, they would likely be listed separately on the balance sheet.