Fortune Towers Ltd.

12/07/2026

I was taking a class recently when I asked a simple question. "Is land a non-current asset or a current asset?"

Almost everyone answered, "Non-current asset."

In fact, I don't think anyone said current asset.

I smiled and responded "What if I told you all that answer is incorrect?"

For a few seconds, the room went quiet. Everyone looked at me like, "What's she getting at?"

Then I explained.

Without context, you can't conclude that a piece of land is a non-current asset or a current asset.

Before you can answer that question, you first need to understand why the business holds the land.

Depending on what the land is held for, it could either be a non-current asset or a current asset.

Take, for instance, a piece of land bought by a manufacturing business to build its factory. It cannot be treated the same way as a piece of land bought for resale by a real estate business.

The manufacturing business would recognise the land as property, plant and equipment (IAS 16) because it is expected to be used in the business.

Meanwhile, the real estate business would recognise the land as inventory (IAS 2) since it is held for sale in the ordinary course of business.

Same land, different treatment.

And the reason I asked that question was simply to remind the class that accounting isn't a one-way street.

It's dynamic, and that's one of the things that makes it so interesting.

The fact that you recognised a piece of land as a non-current asset for Company A doesn't automatically mean you will apply the same treatment to Company B.

As accountants, we must always take the time to understand the context in which every transaction occurs before deciding on the appropriate accounting treatment.

That's why accounting is more than memorising standards or definitions. It's about applying principles to the facts before you.

I hope this helps.

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