Definition of Intangible Asset
An intangible asset is an asset that you cannot touch, since it lacks physical substance. Accountants record intangible assets at their cost when they are acquired. Some intangible assets have a limited life and are amortized to expense over that life.
Other intangible assets have an unlimited life and are not amortized. However, their reported cost is reviewed annually. If there is an impairment loss, the amount on the balance sheet is reduced and the loss is reported on the income statement.
Intangible assets can be some of the company’s most valuable assets. However, if they were developed by the company (as opposed to purchased from another company), there may be no amount to report on the balance sheet.
Examples of Intangible Assets
Intangible assets include the following and more:
- Copyrights
- Patents
- Mailing lists
- Franchises
- Trademarks, brand names, logos, etc.
- Domain names
- Goodwill
Often the market value of a company’s intangible assets is far greater than the market value of the company’s tangible assets such as its buildings and equipment. (Think logos, trademarks, and brand names of Coca-Cola, Nike, Apple, etc.)
