Posted in Finance, Accounting and Economics Terms, Total Reads: 2670
Definition: Redundant Assets
Redundant Assets are non-operating assets i.e. assets which are not required in the fundamental operations of the company. They also include any non-cash working capital which is not required to support the operations.
Redundant assets play an important role in determining the financial status of a company and for this reason, companies are required to report them on their balance sheets in order to provide a clear picture of their financial health. However, redundant assets are not included in the growth and revenue projections of a company as they are not linked to the main operations of the company. Even during the valuation of a company for sale, redundant assets and their associated incomes and expenses are excluded from the estimation as purchasers are generally not interested in acquiring them. Redundant assets should not be valued by discounting or capitalization methods. Rather they should be valued at their net realizable value after all distribution and disposition costs.
Example: Common examples of redundant assets are cash and other marketable securities which have accumulated in a company's balance sheet except in case of investment companies and mutual funds which deal in such securities as a part of their regular operations.