Example of a non-current asset
As an example of a non-current asset, let’s look at a mobile phone manufacturer. The company needs a machine to make phones, and so it buys one for £2 million. The machine’s expected useful lifespan is ten years, and the company believes that after this time, it will still be able to sell the machine for £200,000.
In this scenario, the depreciation expense for the machine is £180,000. This is calculated by taking the final value from the initial value, and dividing the result by the lifespan of the asset ([£2 million - £200,000] divided by 10). At the end of the machine’s useful life, it will be accounted for by the company using the salvage value of £200,000.