Intangible Assets

Learn the meaning of an intangible asset. Discover methods of depreciation and amortization. How is the valuation of a financial capital intangible asset calculated?


Intangible assets for the most part are treated like any other assets. They’re recorded on the balance sheet and valued as part of owner’s equity. Like other assets, intangibles are used to generate revenue. They are however more difficult to put a value on. This article looks at how intangible assets are valued as well as methods of depreciation. First off it’s important to understand the definition of an intangible asset.

Definition of an Intangible Asset
Current assets, like cash and accounts receivables, are an accumulation of a monetary figure usually generated by revenue. Fixed assets, like equipment and furniture, have a physical form (tangible) and are easier to put a value on. Intangible assets on the other hand do not have a physical form. Just like any other assets, intangibles do have a value and are part of the owner’s equity of a company.

Patents
License
Copyright
Goodwill
Contracts
Trademark
Franchise
Every one of the above examples plays a role in generating income. Patents for example allow a company to generate revenue with restraints on the competition. A license to sell a product, like alcohol for example, allows a business to increase revenue with the sale of alcohol.