What Is a Legacy Asset?
A legacy asset is an asset that has remained on a company’s balance sheet for a prolonged period of time and has since develop into old-fashioned or has out of place the vast majority of its initial value. Actually, legacy assets run the risk of becoming a prison duty for the company protecting them, as they are going to incur storage, repair, or maintenance costs.
Key Takeaways
- A legacy asset is an old-fashioned asset that has been stored on an organization’s books for an extended period of time and runs the risk of becoming a prison duty.
- Financial firms may have legacy assets inside of the kind of investments that have out of place most or all of their value, or loans that may not at all be collected.
- Legacy assets steadily have little to no monetary value to the company and will steadily were written down for a loss.
Figuring out Legacy Asset
The period of time “legacy” in reality way something that has existed for a prolonged period of time. The period of time “legacy asset” has been coined to visit an asset that is old-fashioned or old-fashioned. A legacy asset is an asset that has been on the company’s books for a prolonged period of time and has typically diminished in value, most certainly on account of obsolescence, to the aim where it is now a loss for the company. It is a loss every throughout the sense that there’s no value in selling the asset, however as well as it will require some expenditures for storage or maintenance as it will in reality soak up shelf space, upper occupied by way of provide inventory, or it will require annual tune-ups regardless of being in disuse.
Financial firms may have legacy assets inside of the kind of investments that have out of place their value or loans that is probably not collected and have thus been characterized as dangerous debt. Legacy assets steadily don’t have any value to the company and may have been written down for a loss. However, every so often it is possible that they are going to have new value in a definite time or financial gadget. Items which may well be old-fashioned can develop into collector’s items and be assigned value for their nostalgic qualities or on account of they are unusual.
Legacy Asset Example
For example, assume that XYZ Song Corp. has been in trade given that Nineteen Twenties and has always stored additional recording and track collaborating in equipment in its warehouse. Earlier gramophones, turntables, and 8-track avid avid gamers have no longer moderately held onto their value far and wide the ages, on the other hand since they are however held on XYZ’s balance sheet they are booked as legacy assets.
Now and again, XYZ Song will donate an old-fashioned piece of apparatus to a museum or local theater company for a producing. When vinyl were given right here once more into type spherical 2010, they spotted an uptick throughout the name for for vintage turntables and feature been able to advertise numerous their legacy assets on account of the shift in client tastes, turning imaginable money drains into profits.
