What is a Legacy Asset
A legacy asset is an asset that has been on the company's books for a long period of time. A legacy asset has generally decreased in value to the point of a loss for the company. This decrease in value can be due to obsolescence if the company manufactures consumer goods such as electronics. Financial companies may experience legacy assets in the form of investments that have lost their value or loans that will not be collected and so have been characterized as bad debt. The term "legacy assets" comes from the literal meaning of outdated or obsolete.
BREAKING DOWN Legacy Asset
Legacy assets often have no value to the company and have been written down for a loss. However, at times it is possible that they may have new value in a different time or economy. Items that are old can become collector's items and be assigned value for their nostalgic qualities or because they are rare.
Example of Legacy Assets
For example, XYZ Music has been in business since the 1920s and has always kept extra recording and music playing equipment in its warehouse. Old gramophones, turntables and 8-track players haven't quite held onto their value throughout the ages, so they are held on the books as legacy assets. Occasionally, XYZ Music will donate an old piece of equipment to a museum or local theater company for a production. When vinyl came back into fashion around 2010, they saw an uptick in the demand for vintage turntables and were able to sell a number of their legacy assets due to the shift in consumer tastes.