posted on 06-06-2019

Redundant Asset

Updated October 1, 2019

What is a Redundant Asset?

A redundant asset is an asset that generates income, but is not linked to the fundamental operations of the company.

How Does a Redundant Asset Work?

Also known as a non-operating asset, a redundant asset usually generates some type of revenue or return for the owning company, but does not play a part in the company's operations.

For example, if a company previously manufactured plastic model kits but later transitioned into manufacturing plush children's toys, the dyes used to create the parts for the model kits would be labeled redundant assets because they are not incorporated in the manufacturing of plush toys.

A company's asset portfolio is also an example of a redundant asset (except if the company is an investment company or mutual fund).

Why Does a Redundant Asset Matter?

Companies have to report redundant assets on their balance sheet in order to reveal their full financial picture. Redundant assets are omitted from most analyses of growth and revenue projections, because they are unrelated to a company's production capability.