posted on 06-06-2019

Non-Operating Asset

Updated October 1, 2019

What is a Non-Operating Asset?

A non-operating asset is an asset that generates income, but is unrelated to the core operations of the company.

How Does a Non-Operating Asset Work?

Also called a redundant asset, a non-operating asset usually generates some form of revenue or return for the owning company, but play no role in the company's operations.

For example, if a company used to manufacture plastic model kits but later moved into manufacturing plush children's toys, the dyes used to create the parts for the model kits would be considered non-operating assets because they are not used in the production of plush toys.

A company's asset portfolio is also an example of a non-operating asset (except in the case of an investment company or mutual fund).

Why Does a Non-Operating Asset Matter?

Companies must report non-operating assets on their balance sheet in order to reflect a complete financial picture. Non-operating assets are excluded in most analyses of growth and revenue projections since they are unrelated to a company's main production capabilities.

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