Deferred Assets
Deferred assets are defined as assets that the company owns but that have not yet been realized or turned into cash. These assets are usually products or services that have not yet been delivered, or money owed to the company that has not yet been received. Deferred assets can also refer to investments that the company is expecting to realize a return on, such as stocks, bonds, real estate, or other types of investments.
Deferred assets are also known as “non-current assets” or “unrealized assets”. These assets are not included in the normal balance sheet and functional statement because they have yet to be realized or converted into cash. For this reason, deferred assets do not have a corresponding liability on the balance sheet and the company does not record an expense for them either.
For accounting purposes, companies recognize deferred assets as assets for the purposes of measuring their net worth and cash flow. This is because the company still has rights to the assets before they are realized. The value of the asset is then amortized or “written off” over time as the asset is perceived to have less of a value. For example, deferred assets may include future customer payments, amounts due from customers, and other types of contractually bound items.
In the United States, deferred assets are recognized under the Generally Accepted Accounting Principles (GAAP). Under the GAAP, companies can take a certain period of time and record the expected value of certain assets as assets on their balance sheet. The assets are then amortized over the estimated period and recognized as an expense on the financial statements.
Due to the uncertain nature of deferred assets, they are often used as an approximate measure of a companys future performance. Companies use deferred assets to measure their current cash flow position, and to help identify potential cash shortfalls or deficiencies. Companies also use deferral accounting to track the long-term performance of their products and services in order to measure the companys long-term prospects and the potential for future growth.
The process of creating and managing deferred assets can be complicated and companies that have experience in accounting and finance may need assistance in managing deferred assets. It is important for companies to obtain assistance from professionals in order to ensure that their deferred assets are appropriately recorded and managed. Additionally, companies should be aware of the tax implications of deferring certain assets and understand how these items may affect their bottom line.