Tangible assets, sometimes referred to as tangible fixed assets or long-lived tangible assets, are divided into three main types: property, plant and equipment. Property includes the building and land where the business operates. Plant refers to the area in which workers manufacture products or render services. Machinery, vehicles and the equipment used to produce goods are part of the equipment classification.
Tangible assets are those that have a describable physical form and are used to run a business. They can be used to make goods, be rented out or used for administrative purposes as the company sees fit. Tangible goods used for resale are classified as inventory, not assets. A tangible asset increases a company’s money market value and can be liquidated to improve cash flow or used as collateral for a loan.
Land that is owned by the company but not in use also qualifies as property. The same is true for buildings under construction. These types of tangible assets are considered construction-in-process projects and are recorded on the balance sheet as such. Other company-owned real estate is categorized as property as well.
What can be considered a plant is different for each industry. For example, it can be a power plant or factory in the manufacturing industry, an assembly line in the automotive industry or an industrial kitchen in the food industry. Computer equipment, office equipment, company cars, fixtures and fittings, and large pieces of furniture are qualified as equipment. Equipment can also be something as small as a telephone, ink pen or cafeteria tray.