Skip to main content

Chapter 11: Long-Term Assets

Chapter Introduction​

Marie's restaurant has been successful, and she's considering expanding. "I want to buy new kitchen equipment and maybe renovate the dining area," she tells Monsieur Schneider. "But I'm not sure how to account for these purchases. Are they expenses, or should they be treated differently?"

Monsieur Schneider explains that these are long-term assets—assets that will benefit the business for more than one year. "Long-term assets are capitalized—recorded as assets and depreciated over their useful life, rather than expensed immediately. This matches the cost with the periods that benefit from the asset."

Long-term assets (also called fixed assets or non-current assets) are assets that:

  • Have a useful life of more than one year
  • Are used in business operations
  • Are not intended for resale
  • Provide future economic benefits

In Luxembourg, long-term assets are critical for SMEs because:

  • Most businesses have significant investments in equipment, vehicles, and property
  • Depreciation affects taxable income
  • PCN has specific classifications (Class 2 - Immobilisations)
  • Tax rules affect depreciation methods and rates
  • Proper accounting ensures accurate financial statements

This chapter teaches you about tangible and intangible assets, how to distinguish between capitalized costs and expenses, depreciation methods, and how to account for intangible assets. You'll also learn about Luxembourg-specific requirements including PCN Class 2 accounts, depreciation rules, and tax implications.

By the end of this chapter, you'll understand how to properly account for long-term assets, calculate depreciation, and comply with Luxembourg requirements—just like Marie will learn to do for her restaurant's equipment and improvements.

Why It Matters​

Long-term assets represent significant investments for most businesses. Proper accounting for these assets is essential because:

  • Accurate Financial Statements: Assets must be properly valued and depreciated
  • Tax Compliance: Depreciation affects taxable income
  • Business Decisions: Understanding asset costs helps with purchasing decisions
  • Cash Flow Management: Large asset purchases affect cash flow
  • Compliance: Must follow accounting standards and Luxembourg regulations

Luxembourg-Specific Importance:

  • Many SMEs have significant fixed assets
  • PCN requires proper classification (Class 2)
  • Tax depreciation rules must be followed
  • Different rules for different asset types
  • Must maintain proper documentation

Understanding long-term asset accounting helps you:

  • Make informed purchasing decisions
  • Calculate depreciation correctly
  • Optimize tax benefits
  • Maintain accurate records
  • Comply with Luxembourg regulations

Learning Objectives​

By the end of this chapter, you should be able to:

  1. Distinguish between tangible and intangible assets
  2. Analyze and classify capitalized costs versus expenses
  3. Explain and apply depreciation methods to allocate capitalized costs
  4. Describe accounting for intangible assets and record related transactions
  5. Describe some special issues in accounting for long-term assets
  6. Understand Luxembourg fixed assets accounting (PCN Class 2 - Immobilisations)
  7. Explain Luxembourg depreciation rules and tax implications
  8. Understand Luxembourg intangible assets (goodwill, patents, etc.)