The definition of intangible assets is an asset that lacks physical substance. It means that you can not touch or pick it up.
Examples are goodwill, patents, trademarks, and copyrights. A tangible Asset has a physical nature and can include buildings, vehicles, equipment, and stock.
Intangible Assets Balance Sheet
They are typically listed on the balance sheet as part of the assets of the business. The total of fixed assets and intangible assets equals the value of all the assets in the business.
Intangible Assets List
There are several different intangible assets; we look at a few of them.
The government grants patents for new inventions, and it stops others from making, using, or selling an item without their permission. Patents are given for each country, preventing other businesses from importing or making the same item in that country.
The Intellectual Property Office grants patents in the UK. If you own a patent, a value can be put against it. Placing a value against a patent is not an easy task; it is best to seek the advice of a professional. Some patents may have no value at all.
“A trademark is any name, symbol, figure, letter, word, or mark adopted and used by a manufacturer or merchant to designate his or her goods and to distinguish them from those manufactured or sold by others.” – defined by dictionary.com.
You will see examples of trademarks everywhere you go, from fast-food chains to accountancy software. Each business registers its trademark, ensuring that others can not use it or something very similar.
A trademark has value to a business and, depending on the size of the company; will depend on the value in the accounts. You will need the advice of an accountant to value a trademark.
Goodwill is calculated when a business purchases another business. It is the value paid for the company less the actual value of the business in the accounts.
An example is; business A purchases business B for 5000. In the accounts, business B is valued at 4000. Therefore the goodwill is 1000.
Brands – Intangible Assets
If your business has a well-known brand or your brand adds value to the business, it will be included.
An example of a brand is Cadburys has lots of different brands, including 99 Flake, Roses, Wispa and Twirl, to name but a few.
Knowledge of your personnel can also have value. Research and development is also part of knowledge but can be very difficult to value.
Intangible Assets accounting
Intangible assets are recorded together in the balance sheet and totalled. Some intangible assets are not included, and calculating the value may need an expert.
If they are depreciated over time, it is called amortisation. An example of amortisation is that a business obtains a trademark that is valued at 5000 for ten years. The amortisation is, therefore, over ten years and would be 500.00 per year. At the end of the ten years, the trademark can be renewed.
Return from Intangible Assets to balance sheet.