Intangible Assets

An intangible asset is a resource controlled by an entity without physical substance. Unlike other assets, an intangible asset has no physical existence and you cannot touch it.

Types of Intangible Assets and Examples

Some examples are patented technology, computer software, databases and trade secrets trademarks, trade dress, newspaper mastheads, internet domains video and audiovisual material (e.g. motion pictures, television programs) customer lists mortgage servicing rights licensing, royalty and standstill agreements import quotas franchise agreements customer and supplier relationships (including customer lists), etc.

Tangible And Intangible Assets

The single difference between tangible assets and intangible assets is that tangible assets have physical substance. Common examples of tangible assets are vehicles, building, stock, land, etc.

Accounting For Intangible Assets

Intangible assets can be recorded as assets on balance sheet when they are purchased. The reason behind that is an entity is not permitted to assign a value to an internally created intangible asset unless it has met certain criteria. An internally created intangible asset is recognized only if it is probable that the future economic benefits that are attributable to the asset will flow to the entity, and the cost of the asset can be measured reliably.  

Depreciation Of Intangible Assets

Just like depreciation is charged on tangible assets, intangible assets are amortized. The general rule is that only those intangible assets that have finite useful life should be amortized on a straight-line basis.