Intangible Asset

AAA

DEFINITION of 'Intangible Asset'

An asset that is not physical in nature. Corporate intellectual property (items such as patents, trademarks, copyrights, business methodologies), goodwill and brand recognition are all common intangible assets in today's marketplace. An intangible asset can be classified as either indefinite or definite depending on the specifics of that asset. A company brand name is considered to be an indefinite asset, as it stays with the company as long as the company continues operations. However, if a company enters a legal agreement to operate under another company's patent, with no plans of extending the agreement, it would have a limited life and would be classified as a definite asset.

To learn more about asset classes, check out "What is the difference between tangible and intangible assets?"

INVESTOPEDIA EXPLAINS 'Intangible Asset'

While intangible assets don't have the obvious physical value of a factory or equipment, they can prove very valuable for a firm and can be critical to its long-term success or failure. For example, a company such as Coca-Cola wouldn't be nearly as successful were it not for the high value obtained through its brand-name recognition. Although brand recognition is not a physical asset you can see or touch, its positive effects on bottom-line profits can prove extremely valuable to firms such as Coca-Cola, whose brand strength drives global sales year after year.

VIDEO

Loading the player...
RELATED TERMS
  1. Nonmonetary Assets

    Assets in which the right to receive a fixed or determinable ...
  2. Proprietary Technology

    A process, tool, system or similar item that is the property ...
  3. Shadow Pricing

    1. The actual market value of one share of a money market fund. ...
  4. Tangible Asset

    Assets that have a physical form. Tangible assets include both ...
  5. Nonfinancial Asset

    An asset with a physical value such as real estate, equipment, ...
  6. Patent

    A government license that gives the holder exclusive rights to ...
RELATED FAQS
  1. How do businesses determine if an asset may be impaired?

    In the United States, assets are considered impaired when net carrying value (book value) exceeds expected future cash flows. ... Read Full Answer >>
  2. Why is work in progress (WIP) considered a current asset in accounting?

    Accountants consider work in progress (WIP) to be a current asset because it is a type of inventory asset. Accountants consider ... Read Full Answer >>
  3. What are the differences between personal and business tangible net worth?

    The primary difference between personal net worth and business net worth lies in the value assigned to the assets. Tangible ... Read Full Answer >>
  4. What is the difference between fixed assets and current assets?

    Fixed assets, also known as property, plant and equipment (PP&E), are tangible assets that a company expects to use for ... Read Full Answer >>
  5. Why is brand equity considered an intangible asset?

    Brand equity is considered to be an intangible asset because the value of a brand is not a physical asset and is ultimately ... Read Full Answer >>
  6. What can cause an asset to trade above its market value?

    High demand and inaccurate valuation are the two most common factors that may lead to a situation where assets trade above ... Read Full Answer >>
  7. Can you realize capital gains on intangible property?

    Capital gains may be realized on some forms of intangible property. Intangible assets range from patents and licenses to ... Read Full Answer >>
  8. What is the average return on equity for a company in the railroads sector?

    Return on equity (ROE) measures the profitability of a corporation in relation to shareholders’ equity and indicates how ... Read Full Answer >>
  9. What types of companies have a high proportion of intangible assets?

    Several industries have companies with a high proportion of intangible assets. The highest percentages occur in the types ... Read Full Answer >>
  10. What kinds of events or circumstances will increase or decrease the proportion of ...

    An acquisition is one type of event which substantially increases the number and value of intangible assets that a company ... Read Full Answer >>
  11. How do intangible assets appear on a balance sheet?

    Intangible assets are non-physical assets that provide value or a marketplace advantage and are deemed to have a useful life ... Read Full Answer >>
  12. What is the difference between tangible and intangible assets?

    Tangible Assets Tangible assets are physical assets such as land, vehicles, equipment, machinery, furniture, inventory, stock, ... Read Full Answer >>
  13. How does a customer base dictate goodwill?

    A customer base is the number of customers who are excited by your company's brand and are willing to come back and purchase ... Read Full Answer >>
  14. How does one amortize intangible assets?

    Intangible assets are identifiable but not physical. These assets commonly consist of intellectual property and include such ... Read Full Answer >>
  15. Should computer software be classified as an intangible asset or part of property, ...

    In accounting terms, an intangible asset is something of value that is not of physical nature. On the other hand, property, ... Read Full Answer >>
  16. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ... Read Full Answer >>
Related Articles
  1. Forex Education

    Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!
  2. Personal Finance

    Can You Count On Goodwill?

    Carefully examine goodwill and its sources before considering the value of your investment.
  3. Investing Basics

    How To Evaluate A Company's Balance Sheet

    Asset performance shows how what a company owes and owns affects its investment quality.
  4. Markets

    Intangible Assets Provide Real Value To Stocks

    Intangible assets don't appear on balance sheets, but they're crucial to judging a company's value.
  5. Economics

    Explaining Residual Value

    Residual value is a measurement of how much a fixed asset is worth at the end of its lease, or at the end of its useful life.
  6. Economics

    What is the Cash Ratio?

    The cash ratio is the ratio of a company's total cash and cash equivalents to its current liabilities.
  7. Economics

    Understanding Carrying Value

    Carrying value is the value of an asset as listed on a company’s balance sheet. Carrying value is the same as book value.
  8. Economics

    International Financial Reporting Standards (IFRS)

    International Financial Reporting Standards are accounting rules and guidelines governing the reporting of different types of accounting transactions.
  9. Economics

    Explaining Property, Plant and Equipment

    Property, plant and equipment are company assets that are vital to business operations, but not easily liquidated.
  10. Economics

    How to Calculate Trailing 12 Months Income

    Trailing 12 months refers to the most recently completed one-year period of a company’s financial performance.

You May Also Like

Hot Definitions
  1. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  2. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  3. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  4. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  5. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  6. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center