Assets
Assets are possessions and rights from which the business expects economic benefit. They sit on the debit side of the balance sheet.
What do assets mean?
Assets are possessions and rights from which the business expects economic benefit. They sit on the debit side of the balance sheet.
The split between fixed and current assets depends on the purpose of use and the expected conversion. Money in the bank is current; a machine for use over several years is fixed. The value follows from the applicable valuation basis.
How does it work?
An item is recognised as an asset on the balance sheet when two things are established: it is probable that the future economic benefits will flow to the business, and the cost or value can be determined reliably (RJ 115). Internally generated goodwill, your own brand or your own customer base do not meet that threshold and stay off the balance sheet (RJ 210). What decides is who bears the economic risks and rewards, not who is the legal owner: a machine under a finance lease is on the user's balance sheet (RJ 292).
Article 2:364(1) DCC divides assets into fixed and current, according to whether or not they serve the activities on a lasting basis. Fixed assets are intangible, tangible or financial (paragraph 2); current assets are inventories, receivables, securities, cash and cash equivalents and prepayments and accrued income (paragraph 3). The same van is a fixed asset for a plumber and inventory for a car dealer.
Example
An installation company (BV) has on 31 December: software € 6.000, a van and tools € 38.000, a deposit with the landlord € 4.000, stock of materials € 15.000, accounts receivable € 27.000, prepaid insurance € 2.000 and a bank balance of € 8.000. Fixed assets: 6.000 + 38.000 + 4.000 = € 48.000. Current assets: 15.000 + 27.000 + 2.000 + 8.000 = € 52.000. Total assets € 100.000, and therefore also € 100.000 of equity, provisions and liabilities. The order book of € 60.000 and the technicians' expertise are not on it.
In the annual accounts
Debit side of the balance sheet, all size classes.
Difference from costs
An expenditure becomes an asset if it still yields benefit in later years; otherwise it is an expense in the profit and loss account straight away. A new central heating system in the business premises you capitalise and depreciate; the annual maintenance visit you book as a cost.
Common mistakes
- Treating assets as cash
- Including the director-major shareholder's private possessions
What to look out for
- Keep the private possessions of the director-major shareholder out; only what is in the name and for the account of the BV belongs on its balance sheet.
- A micro entity may suffice with the totals of fixed and current assets, plus formation costs and called-up payments as separate items (art. 2:395a(4) DCC). A small entity follows the whole layout of article 364.
- Medium-sized and large entities give a movement schedule for each item under fixed assets, with acquisition, depreciation and closing balance (art. 2:368(1) DCC); for small this does not apply (art. 2:396(3) DCC).
Legal basis and source
art. 2:364 DCC
Frequently asked questions
Why are staff and the customer base not among the assets?
Because their value cannot be determined reliably and the business has no enforceable control over them. A customer base bought from a third party does have a cost price and may be recognised on the balance sheet as an intangible fixed asset.
Are assets the same as possessions?
Nearly. Assets also include rights without a physical form, such as a receivable from a customer, a software licence or prepaid rent.
Is a leased company car an asset?
With a finance lease it is: the risks and rewards of ownership then lie almost entirely with the user, who puts the car and the lease liability on the balance sheet. With an operating lease it is not; the instalments are then costs (RJ 292).
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Preparing Dutch annual accounts?
Your first set of annual accounts is free, for every size class. Create an account and prepare the annual accounts of your Dutch company under Title 9 of Book 2 of the Dutch Civil Code.
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