Intangible Asset

An Intangible Asset is an asset (holds value) that lacks physical substance and can provide economic benefits to its owner.

• Context:
  • It can be challenging to value due to the lack of a physical presence, often requiring specialized Valuation Techniques such as the income approach, market approach, or cost approach.
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• Example(s):
  • Intangible Economic Assets, such as:
    • Intellectual Property: Including Patents, Copyrights, and Trade Secrets, which protect inventions, original works, and confidential business information.
    • Computer Software: Proprietary software systems that are non-physical but essential to business operations and innovation.
    • Contracts: Such as a Financial Asset contract, which represents a legal agreement with economic implications.
    • Goodwill: The value of a company’s brand, customer relationships, and reputation that exceeds the value of its tangible assets.
    • Franchises: Rights granted to operate a business using the branding, processes, and intellectual property of another company.
    • Licenses: Permissions granted to use certain technologies, software, or other intellectual property.
    • Customer Lists: Databases of customer information valuable for marketing and sales efforts.
    • Business Ideas: While often difficult to quantify, innovative business concepts that have the potential to create economic value.
    • Scientific Theories: Foundational ideas that drive research and development, potentially leading to patents or new technologies.
    • Musical Compositions: Original music works protected by copyright, which generate revenue through performances, recordings, and licensing.
  • Non-Economic Intangible Assets, such as:
    • Personal Reputation: The public perception of an individual's character, which may have value in social contexts but is not typically monetized.
    • Creative Talent: The ability to create art, music, or other works, which may lead to economic benefits but is not an economic asset on its own.
    • Aesthetic Appreciation: An individual's ability to perceive beauty, which is valuable personally but not in economic terms.
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• Counter-Example(s):
  • Tangible Assets, such as:
    • Real Estate: Physical property, such as land and buildings, used in economic activities.
    • Machinery: Equipment used in production or other business operations, having a physical presence.
    • Inventory: Goods held for sale or use in manufacturing, representing tangible stock.
  • Financial Assets, such as:
    • Stocks: Equity ownership in a corporation, which has a financial claim but no physical substance.
    • Bonds: Debt instruments that represent a financial obligation, distinct from tangible or intangible assets.
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• See: Asset, Intellectual Property, Goodwill, Tangible Asset, Financial Asset, Creation of the Mind, Intellectual Property, Human Capital.

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References

2014

• (Wikipedia, 2014) ⇒ http://en.wikipedia.org/wiki/Intangible_asset Retrieved:2014-5-14.
  • … The lack of physical substance would therefore seem to be a defining characteristic of an intangible asset. Both the IASB and FASB definitions specifically preclude monetary assets in their definition of an intangible asset. This is necessary in order to avoid the classification of items such as accounts receivable, derivatives and cash in the bank as an intangible asset. IAS 38 contains examples of intangible assets, including: computer software, copyright and patents.

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