What are 'Invisible Assets'

Invisible assets are assets that cannot be seen or touched, but still provide value to the holder. Although an invisible asset is intangible, meaning it does not have a physical presence, it provides a financial value that can be approximated. Generally speaking, accounting standards require invisible assets to be accounted for in a firm's financial statements. An invisible asset is more commonly referred to as an intangible asset. Invisible assets are the opposite of tangible assets, which can be seen and touched. Tangible assets can be real, such as machinery or manufacturing plants or financial, such as stocks or bonds.

BREAKING DOWN 'Invisible Assets'

An invisible asset cannot be held or seen, unlike tangible assets which have a physical presence. Examples of invisible assets include brand recognition and intellectual property such as trademarks, copyrights or patents. Consider for example the Nike "swoosh" logo. This logo has a high degree of brand recognition, meaning that it is easily recognized and associated with the firm Nike by the general public. Another example of an invisible asset is the Geico talking gecko, which the firm has trademarked. The talking gecko has been featured in many commercial advertisements for Geico insurance. Although the Nike swoosh and the Geico talking gecko generate no explicit revenue or income, they are valuable to these firms in that they drive consumers to their products.

The Impact of Invisible Assets on Company Success

The value of invisible assets may be difficult to quantify, but they can be important to the long-term success of a company relative to its competitors. For example, invisible assets can contribute to differences in the market value of otherwise similar companies. Nike competes with several other athletic gear manufactures, such as Adidas (ADDYY) and Under Armour (UA). All three produce clothing, footwear and athletic gear marketed to consumers globally. However, Nike's market value as of early 2018 is almost triple that of Adidas and more than 14 times that of Under Armour. To be sure, there are many nuances to the differences in capital structure, expenses and so forth between these firms, but Nike arguably has the greatest brand recognition among this group. This invisible asset could be a material source of the disparity in market valuations among them.

  1. Intangible Asset

    An intangible asset is an asset that is not physical in nature ...
  2. Trademark

    A trademark is a recognizable insignia, phrase or symbol that ...
  3. Intangible Personal Property

    Intangible personal property is something of individual value ...
  4. Amortization Of Intangibles

    A tax term relating to the practice of deducting the cost of ...
  5. Invisible Hand

    Invisible hand is a metaphor for how, in a free market economy, ...
  6. Patent

    A government license that gives the holder exclusive rights to ...
Related Articles
  1. Small Business

    Patents, Trademarks and Copyrights: The Basics

    Find out how to pursue a patent, trademark or copyright depending on the type of intellectual property you’re trying to shield against potential copycats.
  2. Investing

    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.
  3. Managing Wealth

    What are Intangible Assets?

    Intangible assets represent potential revenue. Take an intangible asset like brand recognition: There is value in people remembering your company and then wanting to buy its products.
  4. Investing

    Explaining amortization in the balance sheet

    Read to find out more about amortization, an important way to account for the value of intangible assets.
  5. Investing

    How to Evaluate a Company's Balance Sheet

    Asset performance shows how what a company owes and owns affects its investment quality.
  6. Small Business

    Hiring A Really Competent Patent Attorney

    Use this guide to find a well-qualified attorney to guide your application through the complex patenting process at the best possible price.
  7. Investing

    How Does Goodwill Affect Stock Prices?

    Intangibles like goodwill have a role in stock prices, but just how much really?
  8. Personal Finance

    Things You Didn't Know You Could Copyright

    Here's a rundown on what can be protected by copyright law so you can be prepared.
  9. Investing

    Writing Down Goodwill

    An ill-fated acquisition of Hewlett-Packard's demonstrates what can happen when goodwill goes bad.
  1. What kinds of events or circumstances will increase or decrease the proportion of ...

    Learn the variety of events and circumstances which can significantly increase or decrease the proportion of intangible assets ... Read Answer >>
  2. Is intellectual property considered a form of capital asset within a company?

    Discover what certain types of intellectual property are considered to be a form of capital asset recorded on the financial ... Read Answer >>
  3. What are the differences between amortization and impairment?

    Learn the differences between amortization and impairment as they relate to intangible assets held on a company's balance ... Read Answer >>
  4. How are net tangible assets calculated?

    Learn about net tangible assets, what it measures and how to calculate a company net tangible assets using examples. Read Answer >>
  5. Is goodwill considered a form of capital asset?

    Learn more about capital assets of a business, and understand why goodwill is an intangible asset that is classified as a ... Read Answer >>
Hot Definitions
  1. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  2. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  3. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  4. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  5. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
  6. Watchlist

    A watchlist is list of securities being monitored for potential trading or investing opportunities.
Trading Center