What is Tangible Assets?
Tangible assets are physical, touchable resources owned and controlled by a business that are expected to generate economic benefits for more than one accounting period. They appear on the balance sheet at cost less accumulated depreciation and impairment.
How It Works
- Recognise the asset at cost — purchase price plus all costs needed to make it ready for use.
- Assign a useful life and choose a depreciation method.
- Depreciate the asset systematically over its useful life.
- Review the asset for impairment whenever there is an indicator that its carrying amount may not be recoverable.
- Derecognise the asset on disposal and record the gain or loss in the income statement.
Saudi Context
Tangible assets are a major component of the zakat base for Saudi resident companies, and their net book value is reported in the zakat declaration filed with ZATCA. IAS 16 governs measurement, and SOCPA requires consistent application across reporting periods.
Example
A delivery company buys a fleet of vans for SAR 1,200,000 with an estimated useful life of six years. Annual depreciation under the straight-line method is SAR 200,000, and the net book value at the end of year three is SAR 600,000.