What are stranded assets?

Stranded assets refer to investments or properties that have lost their market value before their anticipated useful life is over, often due to changes in market conditions, regulations, or technological advancements. The majority of stranded assets are typically non-performing, meaning they do not generate expected returns or revenue and may be recognized as losses on a company’s balance sheet.

While stranded assets can include a variety of asset types, they are most commonly associated with sectors subjected to regulatory shifts or advancements in technology, such as fossil fuel reserves that become unviable due to a societal shift toward renewable energy sources. As a result, the recognition of these assets on financial statements as losses reflects their diminished utility and marketability, highlighting the financial implications of changing economic environments.

The other options do not accurately convey the concept of stranded assets. For instance, assets that are increasing in value or yielding reliable returns would not fit the definition of stranded assets, which by nature signify a decline or a lack of performance in their economic value. Thus, the focus on non-performing assets aligns correctly with the definition of stranded assets and clarifies their implications in financial reporting.