Non-monetary asset

economic-dictionary

A non-monetary asset is an asset that a company has on its balance sheet and that does not have a fixed nominal value.

Non-monetary assets are, therefore, assets whose monetary value cannot be accurately calculated. Due to this, its value can fluctuate a lot over time. Where this fluctuation may be due both to the effect of inflation or deflation and to more specific variations in its value.

Generally they tend to stand out for being assets that are in the financial balance of the company, but that are not easily convertible into money or liquidity in the short term.

Differences between non-monetary and monetary assets

In the financial balance of a company we have two types of assets: monetary and non-monetary. And the main factor that differentiates them is the liquidity of the asset. That is, if they are easily convertible into a certain amount of money in a short period of time. Therefore, if it can be easily converted into money, it will be considered a monetary asset. On the other hand, if it is difficult to convert into money in the short term, it will be a non-monetary asset.

There is another factor that can help us differentiate these two types of assets, the so-called effect of general economic forces. As mentioned, the effect of inflation or deflation is more noticeable in non-monetary assets than in monetary assets. This may be another factor that helps us differentiate them.

Another factor that helps to classify them as monetary or non-monetary is also usually exposed. the effect of time. That is, the short term or the long term. Understanding that the resources that the company maintains for the long term are non-monetary. And, on the other hand, those that it holds in the short term are monetary assets. This factor, as we see, is closely related to the liquidity factor.

Among the main examples of monetary assets we would have: money, bank deposits, or short-term financial investments (stocks, bonds, etc.). All of them belong to the part of the current or short-term assets of the financial balance of a company. We see the examples of non-monetary assets below.

Examples of non-monetary assets

A good example of a non-monetary asset is the tangible fixed assets of a company or real estate assets. And within them the land, offices or property where the activity of the company is located. As we know, in these goods the passage of time can greatly affect their valuation. In addition, they are usually somewhat illiquid assets that are difficult to convert into money quickly in the short term.

On the other hand, we would have a series of intangible assets such as patents, goodwill, intellectual property, etc. In these cases, we again have the difficulty of being able to value the price of these goods accurately. Let's look at goodwill for example:

Goodwill is the ability of a company to generate future profits thanks to its brand power, client portfolio, or the value of patents. What value would we put on the brand? And to patents? It is something very complicated, for that reason they are properly identified with the definition of non-monetary assets.

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