Quick Summary
Intangible Assets include patents, trademarks, copyrights, and other non-physical resources that generate value.
Intangible Assets are identifiable non-monetary assets without physical substance that are controlled by an entity and from which future economic benefits are expected to flow. They are increasingly important in the modern economy.
Types of Intangible Assets
Identifiable Intangibles (can be separately acquired/sold):
- Patents
- Trademarks and brand names
- Copyrights
- Software and licenses
- Customer lists
- Franchise agreements
Unidentifiable Intangibles:
- Goodwill (only from acquisitions)
Recognition Criteria
- Identifiable (can be separated or arises from contractual rights)
- Control (entity has power to obtain benefits)
- Future economic benefits expected
- Cost can be measured reliably
Accounting Treatment
| Finite Life | Indefinite Life |
|---|---|
| Amortized over useful life | Not amortized |
| Patents, copyrights | Some trademarks, goodwill |
| Tested for impairment | Tested annually for impairment |
Internally Generated vs Acquired
- Acquired: Always recognized at cost
- Internally Generated: Research expensed; Development capitalized if criteria met
Valuation Challenges
- No active market for many intangibles
- Unique to each company
- Benefits difficult to measure
- Useful life estimation subjective
Key Points
- Non-physical assets with economic value
- Includes patents, trademarks, copyrights
- Finite life intangibles are amortized
- Indefinite life intangibles tested for impairment
- Increasingly valuable in digital economy