Legacy Asset

What Is a Legacy Asset?

All a legacy asset is a asset that has stayed on a company's balance sheet for a long period of time and has since become obsolete or has lost practically its initial value. As a matter of fact, legacy assets run the risk of turning into a liability for the company holding them, as they might cause storage, repair, or maintenance costs.

Grasping Legacy Asset

The term "legacy" in a real sense means something that has existed for a long period of time. The term "legacy asset" has been authored to allude to an asset that is obsolete or obsolete. A legacy asset is an asset that has been on the company's books for a long period of time and has generally diminished in value, probable due to obsolescence, to the point where it is currently a loss for the company. It is a loss both as in there is no value in selling the asset, yet additionally it might require a few expenditures for storage or maintenance as it can occupy shelf room, better occupied by current inventory, or it might require annual check ups in spite of being in neglect.

Financial companies might have legacy assets as investments that have lost their value or loans that won't be collected and have in this way been portrayed as bad debt. Legacy assets frequently have no value to the company and will have been written down for a loss. Nonetheless, on occasion it is conceivable that they might have new value in an alternate time or economy. Things that are old can turn into gatherer's things and be assigned value for their nostalgic characteristics or on the grounds that they are rare.

Legacy Asset Example

For instance, assume that XYZ Music Corp. has been in business since the 1920s and has consistently kept extra recording and music playing equipment in its warehouse. Old gramophones, turntables, and 8-track players haven't exactly held onto their value all through the ages, however since they are as yet held on XYZ's balance sheet they are reserved as legacy assets.

Periodically, XYZ Music will give an old piece of equipment to an exhibition hall or nearby venue company for a production. At the point when vinyl returned into fashion around 2010, they saw an uptick in the demand for vintage turntables and had the option to sell a number of their legacy assets due to the shift in consumer tastes, transforming potential money channels into profits.

Features

• A legacy asset is an obsolete asset that has been saved on a firm's books for an extended period of time and runs the risk of turning into a liability.
• Financial companies might have legacy assets as investments that have lost most or the entirety of their value, or loans that won't ever be collected.
• Legacy assets frequently have practically no economic value to the company and will frequently have been written down for a loss.