Stranded asset
Former physical asset, now a liability / From Wikipedia, the free encyclopedia
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Stranded assets are "assets that have suffered from unanticipated or premature write-downs, devaluations or conversion to liabilities".[1] Stranded assets can be caused by a variety of factors and are a phenomenon inherent in the 'creative destruction' of economic growth, transformation and innovation; as such they pose risks to individuals and firms and may have systemic implications.[2] Climate change is expected to cause a significant increase in stranded assets for carbon-intensive industries and investors, with a potential ripple effect throughout the world economy.[3][4]
The term is important to financial risk management in order to avoid economic loss after an asset has been converted to a liability. Accountants have measures to deal with the impairment of assets (e.g. IAS 16) which seek to ensure that an entity's assets are not carried at more than their recoverable amount.[5] In this context, stranded assets are also defined as an asset that has become obsolete or non-performing, but must be recorded on the balance sheet as a loss of profit.[6]