> For the complete documentation index, see [llms.txt](https://help.modelreef.io/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://help.modelreef.io/help/drivers-variables-and-timing/asset-variables.md).

# Asset Variables

This article explains **Asset variables** in Model Reef.

You will learn:

* What an Asset variable represents.
* How Asset variables handle capex, opening balances and depreciation.
* How Assets affect P\&L, Balance Sheet, Cashflow and the Cash Waterfall.
* Patterns for modelling simple and more detailed asset behaviour.

Asset variables represent things the business owns or invests in that have ongoing value, rather than one off expenses.

***

## 1. What an Asset variable is

An **Asset variable** captures:

* New capital expenditure (capex) such as equipment, fit outs, software, vehicles, plant and property.
* Existing assets brought into the model via opening balances.
* The depreciation profile of those assets over time.

Each Asset variable has:

* A value for the asset or capex amount.
* A start date and possibly an end date for capex programmes.
* A depreciation method and useful life.
* A category such as `Assets - Property`, `Assets - Equipment`, `Assets - Intangibles`.

***

## 2. Asset rules in the P\&L

In the **P\&L**:

* Asset variables generate **Depreciation expense** based on the selected method and life.
* Depreciation reduces EBIT but does not consume cash directly.
* There is no direct capex expense line in the P\&L because capex is capitalised as an asset.

Depreciation is the non cash mechanism by which capitalised assets are expensed over time.

***

## 3. Asset rules in the Balance Sheet

In the **Balance Sheet**:

* New capex increases the **Assets** balance at the time of purchase.
* Depreciation reduces the carrying amount of the Asset over its useful life.
* Model Reef tracks the net carrying value (asset minus accumulated depreciation).
* Opening asset balances can be loaded via imports or manual entry.

The engine ensures that asset balances move consistently with capex and depreciation.

***

## 4. Asset rules in the Cashflow Statement and Cash Waterfall

In the **Cashflow Statement**:

* Asset variables drive **Investing cashflows**:
  * Capex appears as an outflow when cash is spent.
  * Depreciation does not show in cashflow because it is non cash.

In the **Cash Waterfall**:

* Capex appears as a separate line item after operating cashflows and working capital movements.
* Depreciation is not shown in the waterfall (it is a non cash P\&L item).

Capex is a key input to free cashflow to the firm and free cashflow to equity in the valuation engine.

***

## 5. Opening balances vs new capex

You can model assets in two ways:

* **Opening balances**
  * Represent assets that already exist at the model start date.
  * You input the carrying amount and remaining life.
  * Model Reef calculates future depreciation and leaves cash unaffected at the start date.
* **New capex**
  * Represent new investments made during the forecast.
  * Model Reef increases Assets and reduces cash when capex occurs.
  * Depreciation is calculated from the date the asset enters service.

You can mix both within the same model and branch.

***

## 6. Common asset modelling patterns

Examples:

* **Expansion capex**
  * New stores, clinics, plants or venues modelled as capex variables in the relevant branch.
  * Depreciation allocated to that branch's P\&L.
* **Sustaining capex**
  * Recurring capex to maintain existing capacity.
  * Schedules or drivers used to link capex levels to revenue or capacity drivers.
* **Intangible assets**
  * Capitalised development costs or software.
  * Amortisation treated similarly to depreciation if required.

Model Reef does not currently provide automated disposal logic, but you can model disposals by adjusting balances manually or with offsetting variables.

***

## Related articles

* [Multi-Venue Consolidated Reporting](/use-cases/hospitality-restaurants-cafes-bars/multi-venue-consolidated-reporting.md)
* [Build a Bottom Up Forecast](/how-tos/core-modelling/build-a-bottom-up-forecast.md)
* [Cash Priority Rules](/help/financial-outputs-and-valuation/cash-priority-rules.md)
* [KPI Cards](/syntax/chart-and-table-syntax/kpi-cards.md)