Intangible assets

The Economist  Dec 19  Comment 
WHEN you work as an equity analyst at an investment bank, your task is clear. It is to comb all the statements made by corporate executives, to scour the industry trends and arrive at an accurate forecast of the company’s profits. Achieve this...
Forbes  Apr 27  Comment 
CFOs can draw on their data capital to quickly envision and plan for multiple potential futures.
The Hindu Business Line  Apr 25  Comment 
Reliance Jio has written down ₹12,000 crore of intangible assets for FY16. The company also disclosed to analysts that its capital expense was partly met with suppliers credit of ₹41,000 crore.Relia...
Reuters  Dec 21  Comment 
* Says the acquisition includes all rights to quizup and certain other assets, including about $1.2 million in cash
The Hindu Business Line  Dec 7  Comment 
You mean ‘freebies’.Yes, I’m talking of the ‘freebie’ handouts of everything from TV sets to mixies to grinders to laptops to bicycles. Many of these have been derided by conservative economists and c...


Intangible Assets are non-physical assets on a company's balance sheet

Intangible assets are assets that cannot be physically seen or touched. In general this includes things like intellectual property (such as patents and trademarks), brand recognition, and trade secrets. On the balance sheet, intangible assets add to the total asset value and, as such, are a component of the total book value.

While the value of intangible assets is harder to calculate than physical assets such as equipment or factories, intangibles have no less real value than their physical counterparts. There are several methods used in calculating the value of intangible assets, all of which rely on an accountant or accountants' estimates of worth.

In most cases, GAAP does not allow internally generated intangibles to show up on the balance sheet. For example: Coco-Cola corporation would not list the value of its brand on its balance sheet. On the other hand, if a company pays more than the fair value to acquire another company, the difference is shown as goodwill in the acquirer's balance sheet. Also, research-based companies, such as drug-manufacturers, are allowed to capitalize their research and development expenses -- since, in theory, research provides value long after it has been completed.

Some intangibles are amortized, i.e. written off, as expense over time. Under the U.S. GAAP goodwill cannot be written off as expense unless the company has a reason to believe that it has reduced in value. Amortization of intangibles decrease income of the company and hence offer tax benefits.

It should be noted that goodwill, while technically itself an intangible asset, can be listed separately on the balance sheet. In other words, a balance sheet may list intangible assets and goodwill separately or together.

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