Intangible asset
From Wikipedia, the free encyclopedia
Intangible assets are defined as assets that are not physical in nature. The most common types of intangible assets are trade secrets (e.g., customer lists and know-how), copyrights, patents, trademarks, and goodwill.
The Uniform Commercial Code (Section 9-102(a)(42)) defines "general intangibles" as
- "any personal property...other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter of credit rights, letters of credit, money, and oil, gas, or other minerals before extraction. The term includes payment intangibles and software."
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[edit] Research & Development
Millions are spent each year by corporations to research and develop new intangible assets. To protect their research and development (R&D) efforts, corporations generally rely on intellectual property laws and unfair competition laws.
[edit] Financial accounting
[edit] General standards
The Financial Accounting Standards Board (FASB) offers some guidance as to how intangible assets should be accounted for in financial statements. In general, intangibles that are developed internally are not recognized and intangibles that are purchased from third-parties are recognized.
[edit] Expense recognition
Intangible assets are typically expensed according to their respective life expectancy. Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter. Examples of intangible assets with identifiable useful lives include copyrights and patents. Intangible assets with indefinite useful lives are reassessed each year for impairment. If an impairment has occurred, then a loss must be recognized. An impairment loss is determined by subtracting the asset's fair value from the asset's book/carrying value. This impairment loss may only be reversed under certain circumstances. Trademarks and goodwill are examples of intangible assets with indefinite useful lives.
[edit] See also
- IAS 38: Intangible Assets
- Intellectual capital
- Intellectual property
- Goodwill
