A fixed asset is an item or right a business holds for long-term use. A machine is a tangible fixed asset; purchased software may be an intangible fixed asset. In both cases, check the conditions for recognising it on the balance sheet. A software subscription, by contrast, generally gives access to a service.
The distinction changes how you read the accounts: paying for equipment does not mean its full price immediately becomes an expense. Here is how to classify a purchase, calculate its carrying amount and understand what it really costs your business.
Key points
- Tangible: a physical item used over the long term, such as a machine, vehicle or furniture.
- Intangible: a right or value without physical substance, such as an acquired licence, where the accounting criteria are met.
- Expense or asset: neither the price nor the word “investment” on an invoice is enough to decide.
- Three figures to distinguish: the amount paid, the depreciation or amortisation expense, and the remaining carrying amount on the balance sheet.
When can you recognise an asset?
An asset is a resource forming part of the business’s property. To recognise it on the balance sheet, Article 959 of the Code of Obligations (CO) requires three conditions to be considered together:
- the business controls it as a result of a past event, such as a purchase or a contract already entered into;
- it expects economic benefits from it, for example by using it to produce goods or provide services;
- its value can be estimated with sufficient reliability.
Items meeting the legal conditions must be recognised as assets; other items cannot be. Materiality also matters when applying accounting principles.
Then determine where they belong on the balance sheet. Fixed assets include items acquired for long-term use or ownership, meaning more than twelve months under Article 960d CO. They also include financial assets and participations, which are outside this guide’s scope.
Intended use therefore matters as much as the item itself. A car offered for sale by a dealer belongs in inventory. The same car used long term by the sales team may be a fixed asset.
Six common purchases: where do they belong?
| Purchase | Treatment to consider | Useful question |
|---|---|---|
| A machine used for several years | Tangible fixed asset if the criteria are met. | What does it cost to bring into use, and what is its useful life? |
| Goods bought for resale | Inventory, then cost of goods sold. | How much remains unsold at year end? |
| Software or a licence acquired for long-term use | Intangible fixed asset if the criteria are met. | What rights do you actually obtain? |
| A cloud software subscription | Expense for the period, with a prepayment adjustment if paid in advance. | Which months of service does the invoice cover? |
| Maintenance that keeps equipment working | Generally a maintenance expense. | Does it simply restore normal working condition? |
| Work increasing capacity or useful life | Capitalisation may be justified for the portion meeting the criteria. | What lasting improvement can you document? |
The examples follow the Code of Obligations and double-entry bookkeeping, with expenses allocated to the financial year they concern. They assume the business will continue operating.
Tangible fixed assets
These are physical items used over the long term: machinery, vehicles, furniture, equipment or buildings. Acquisition cost includes the purchase price and costs directly needed to bring the asset to the location and condition required for use. Discounts reduce that cost; deductible VAT is treated separately.
A CHF 11,000 machine: what do the accounts show?
Take a fictional example. A machine costs CHF 10,000, with delivery and installation costing CHF 1,000, excluding deductible VAT. It enters service at the start of the financial year, will be used for five full years and has no estimated residual value at the end. We use straight-line depreciation and assume no other impairment.
| Step | Calculation | Amount |
|---|---|---|
| Acquisition cost | 10,000 + 1,000 | CHF 11,000 |
| Annual depreciation | 11,000 ÷ 5 years | CHF 2,200 |
| Carrying amount after one year | 11,000 − 2,200 | CHF 8,800 |
The CHF 2,200 is an expense in the income statement. The CHF 8,800 is the machine’s remaining carrying amount, not necessarily its resale price. Depreciation does not trigger another supplier payment: cash leaves according to the invoice’s payment terms.
Using direct depreciation, record the purchase excluding VAT as a CHF 11,000 debit to “Machinery” and credit to “Trade payables”. At year end, debit “Depreciation” and credit “Machinery” by CHF 2,200. Payment clears the supplier liability against the bank. Account names and numbers depend on your chart of accounts.
Five years is an illustrative assumption, not a mandatory tax depreciation period. For a purchase during the year, also consider the date it enters service and the method used. Keep invoices and a breakdown of costs included in the asset.
VAT: which amount forms part of the investment?
At the current standard VAT rate of 8.1%, VAT on CHF 11,000 is CHF 891 (11,000 × 8.1%). The supplier therefore invoices CHF 11,891. Under the effective VAT method, where the full deduction conditions are met, CHF 891 is deductible input tax and the machine’s cost remains CHF 11,000.
If the business has no right to deduct VAT on this purchase, the cost includes VAT and reaches CHF 11,891. A partial deduction requires separating deductible and non-deductible amounts. These rights are governed in particular by Articles 28–30 of the VAT Act. Under the net tax rate method, input tax is taken into account on a flat-rate basis: do not copy the separate input tax deduction entry from this example.
Intangible fixed assets
Purchased software, a licence or a patent may be an intangible fixed asset where the accounting criteria are met. Lack of physical substance does not prevent recognition on the balance sheet. However, development, marketing or training spending does not become an asset simply because it is expected to improve sales.
For a software project, ask what is delivered, what rights the business obtains, for how long and which costs can be identified. An invoice labelled “development” is not enough. Support the rights acquired, expected benefits and valuation. Nor can a reputation built through your work be freely converted into goodwill on the balance sheet.
A prepaid subscription is not purchased software
A CHF 2,400 subscription excluding VAT covers twelve months from 1 October to the following 30 September. With even usage, the monthly cost is CHF 200 (2,400 ÷ 12). At a 31 December year end, three months, or CHF 600, relate to the current year; the remaining nine months represent CHF 1,800.
In this accrual-based example, CHF 1,800 appears as prepaid expenses within current assets. It is not an intangible fixed asset. Payment took place before the service was consumed, without acquiring ownership of the software. The accrual rule and its statutory exception are set out in Article 958b CO.
Expense or fixed asset: how do you decide?
The Code of Obligations does not set a universal CHF 1,000 threshold above which all purchases must be capitalised. First consider the nature of the purchase, the asset recognition criteria and its useful life, then its materiality to the accounts.
For small equipment, agree a consistent approach with your accountant and document it. Fifty computers bought together are not necessarily assessed like one low-value accessory. Article 958c CO requires, among other things, materiality and consistency: changing treatment merely to obtain a desired December result is not an accounting policy.
Also distinguish maintenance from improvement. Repairing a machine to restore normal working condition is generally a maintenance expense. Adding a module that permanently increases capacity may be an investment if the conditions are met. Request an itemised quotation and retain a description of the work to support the decision.
Depreciation, amortisation and changes in value
Under Article 960a CO, reductions in value caused by use and time are reflected through depreciation or amortisation. Losses caused by other factors require valuation adjustments. If a machine is damaged or software can no longer be used, reassess its value without waiting for the end of the depreciation schedule.
A machine and software do not necessarily have the same useful life. Land is not routinely depreciated like a building. Tax-accepted rates, including those in the FTA’s A/1995 notice (French), do not replace the accounting assessment. Specific cantonal practices may also apply.
Our depreciation guide explains straight-line and declining-balance methods and tax rates. Where notes to the financial statements are required, they disclose accounting policies not already prescribed by law and necessary information on the relevant items.
Track the asset until it leaves the business
A fixed asset register connects each item or right to its supporting documents. Record its description, purchase and in-service dates, recognised cost, useful life, depreciation or amortisation method, accumulated charges and remaining carrying amount. Add impairment adjustments, disposals and write-offs. Recording the location or person responsible makes physical checks easier.
Return to the CHF 11,000 machine. After two full years, accumulated depreciation is 2 × 2,200 = CHF 4,400, leaving a carrying amount of CHF 6,600. If it is then sold for CHF 7,000 excluding VAT, with no disposal costs or other adjustments, the gain is CHF 400 (7,000 − 6,600). The entire CHF 7,000 is not profit: it also replaces an asset already recorded in the accounts.
During your business inventory count, identify items sold, destroyed or no longer usable. Conversely, fully depreciated equipment may still work: its carrying amount does not mean it needs replacing. Keep tracking it while the business owns it.
Reconcile the register to the balance sheet at the year-end close. For each category, check: opening net carrying amount + additions − carrying amount of disposals − depreciation, amortisation and impairment = closing net carrying amount, assuming no other movements. Explain every difference with a document or entry.
Before investing, look at both profit and cash flow
In your business budget, distinguish the asset payment, which uses cash, from depreciation or amortisation, which spreads its cost through profit and loss.
Before signing, gather the itemised quotation, contract, installation costs and expected useful life. You can then determine what is an expense, an asset or a prepaid service, and document the treatment chosen.
Also prepare your cash flow forecast using actual payments. A CHF 2,200 annual depreciation expense does not fund a CHF 11,891 invoice due today. Budget separately for maintenance, subscriptions and eventual replacement.
Our accounting service can help classify investments, track fixed assets and understand their effect on your business’s profit.
Frequently asked questions
Is software always a fixed asset?
No. Distinguish in particular the acquisition of a long-term right, a subscription and development costs, then assess the applicable criteria.
Must a fixed asset be a physical object?
No. It can be tangible, intangible or financial.
Can the full cost of a machine be deducted immediately?
Not automatically. Treatment depends on the applicable accounting and tax rules; the purchase may need to be capitalised and then depreciated.
Sources and references
- CO, Articles 959 and 959a: asset criteria and balance sheet structure; Article 960d: fixed assets and long-term ownership.
- CO, Articles 958b and 958c: accruals, materiality, consistency and inventory records; Article 959c: notes to the accounts.
- CO, Articles 960 and 960a: valuation, depreciation and valuation adjustments.
- VAT Act, Articles 28–30: input tax deduction; Article 37: net tax rates; FTA: current VAT rates.
- FTA, notice A/1995: depreciation of business assets (French).
References checked on 9 November 2026 against the Code of Obligations in force, consolidated as at 1 October 2026. The worked examples are fictional and use the stated assumptions; their depreciation rates and periods are not compulsory rates or periods.
Romain Prieur is a Swiss certified public accountant and founder of Entreprendre.ch. With more than ten years of experience in audit and business advisory in Switzerland, he advises entrepreneurs on company formation, accounting and taxation.
