What is equipment?

Narrowly defined, equipment is any movable asset (tangible movable asset) that is repeatedly or continuously used in economic activity in the production of goods and services.  In broad terms, equipment is any item (good) used by a business, government entity, nonprofit organization or consumer for a specific purpose or in the performance of some activity, such as automobiles, flat-screen displays and sporting goods.  Equipment is in essence any personal property, which is any kind of asset other than real estate (real property).

The US Uniform Commercial Code (UCC) defines equipment as all goods other than inventory, farm products or consumer goods.  Consumer goods are those goods that are used or bought for use primarily for personal, family or household purposes.  An individual or agent, trustee or representative acting on behalf of an individual is a consumer.

Consumer durable goods, which are commodities, such as motor vehicles, that are purchased and owned by consumers and used repeatedly or continuously over a prolonged period (nonconsumable).  Distinguished from consumer goods, capital goods are manufactured resources that are used in economic activity to produce goods and services.

Goods = Consumer Goods + Capital Goods

For classification as equipment by the US Bureau of Economic Analysis (BEA) in its national income and product accounts (NIPAs), equipment must be a fixed asset.  The BEA defines a fixed asset as any tangible asset or intangible asset that is used repeatedly or continuously in the processes of economic production for at least a year.  A fixed asset includes equipment, structures and intellectual property.

The BEA distinguishes between residential equipment and nonresidential equipment.  Residential equipment comprises fixed assets purchased by landlords and included in the rental to tenants, such as furniture and household appliances, while nonresidential equipment, consist of tangible products (fixed assets) other than structures, such as machinery and vehicles.

Like the BEA, the US-based Equipment Leasing and Finance Association (ELFA) excludes noncommercial (consumer) equipment from its surveys and reports.  However, Brussels-based Leaseurope classifies both consumer and commercial goods as equipment, unlike the BEA, the ELFA or the UCC.