Intangible assets and their importance

An asset that does not have a physical existence, but is a useful resource for any business or company, is known as an intangible asset. They cannot be touched. These are only present in pen and paper, while tangible assets can be touched. However, they also have present value and future value. Intangible assets are for a fixed time period and are long-term assets of a company. Companies can either develop these assets internally or buy them from other companies during the acquisition. Intangible assets mean a lot to the company, so through this post we are going to give you information about intangible assets.

Intangible asset list

These assets do not have a physical presence but are beneficial for companies. Intangible assets include –

  • Patents
  • Copyright
  • Goodwill
  • Trademark
  • Franchisee agreement etc.

Types of intangible assets

Here we will try to understand the different types of intangible assets mentioned above. Below we are going to briefly explain the benefits and value of these intangible assets in case of a company through various information –

Patents

A patent is a legal right granted to an entity. It gives uniqueness to a company to sell, use or produce specific innovation. Patents can be classified into three types. These are – Utility Patents, Design Patents and Plant Patents. In many ways, a patent is a legal right. This right is granted to a company, individual or organization for any new service, process, technology, design, product or anything that has not happened yet. If one gets a patent for a technology or thing, one cannot copy it and the company has a monopoly on that technology and object. The company grows its business by making maximum profit through this monopoly. Thus a patent is an intangible asset, but it means a lot to a business. Patents are listed in the company’s balance sheet. A company can obtain a patent by purchasing from another company or inventing a new product. Thus the value of a patent depends on the process under which it is acquired.

Goodwill

Goodwill can be defined as the difference between the market value of a company and the value of the company recorded on its balance sheet. Goodwill is recorded at the time of acquisition of the business. Since Goodwill is not linked to any physical goods owned by the company, it is an intangible asset. Goodwill is usually listed on the company’s balance sheet.

Trademark

A trademark is basically a symbol, used to represent a company. It can be an image, a logo, word, phrase, slogan, product name or a combination of all of these. The company acquires a trademark to prevent it from being copied or copied. Thus we can say that other companies cannot use another’s logo or that there is a legal protection trademark prohibiting companies from using another’s logo. Trademarks have their own distinct value, as it helps the company establish identity and form a bond between consumers in terms of quality and price. It is associated with the reputation of the business, so it is listed as an intangible asset.

Copyright

Poetry, novels, computer software, pictures of artist or architect etc. are copyrighted to protect others from being copied. It is legal permission to protect any such work from copying or reproducing. Copyright lasts for a very long time and depends on many factors. The value of a copyright depends on how the business has acquired it. If the product is developed internally, the value of the copyright is equal to the value of acquiring the copyright, but if it will be purchased from another company, its cost will be equal to the cost of acquisition.

Franchise agreement

A franchise agreement grants a company the legal right to use the name of another company or to sell a product or service developed by another company. Franchise agreements are quite common. Most food chains, retail stores, etc. operate their business under the franchise system.

How intangible assets work?

Intangible assets are recorded in the company’s balance sheet and are considered long-term assets of the company. The company’s balance sheet reflects the company’s liabilities, assets and shareholders’ equity. Intangible assets as we know cannot be physical, but it matters a lot to companies. Intangible assets help to grow and benefit the business of any company, so they have their own distinct value.

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