Valuable business possessions that do not take physical form but have certain property rights and attributes that create value for their owners.
What It Means
Intangible assets are a special type of business possessions. While they lack physical shape and substance, they have two key attributes:
Types of intangible assets
Intangible assets can be either real or personal business property. The real property intangibles are associated with immovable real estate and, more specifically, its ownership rights. These include the rights to use, sell, lease or control access to the real estate.
The personal business property intangible assets are the type most familiar to business people. As the name implies, these intangible assets are not attached to the real estate.
Examples of intangible assets
Depending on the industry, a business can have quite a variety of intangible assets in its possession. Here are just the most common ones:
How to spot intangible assets in a business
Since intangible assets cannot be touched or seen, it is important to know what is or is not an intangible asset.
You can use this check list when establishing the presence of intangible assets in a business:
What is not an intangible asset
Things that exist in a business may not have value. Conversely, some factors may contribute to business value creation, yet fail to exist as an intangible asset. Here are some examples:
While not intangible assets in and of themselves, these factors can contribute to the value of an intangible asset. For example, superior profitability is a key factor which creates business goodwill, a very important type of intangible asset.
What makes intangible assets valuable
As with tangible assets, the worth of intangible assets is defined by their ability to create value for their owners. In a business, the intangible assets do so in two important ways:
Connection between the tangible and intangible assets
Tangible assets are often used to realize the value of intangible assets. Think of an invention that requires machinery the business uses to produce innovative products. On the other hand, such an invention can be patented and then licensed to someone else.
Either way the inventors enjoy the benefits by deriving income - directly from the product sales or royalties collected. What this means is that the intangible assets have existence of their own, separate from tangible assets.
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