Intangible Assets

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Description of Intangible Assets. Explanation.

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Intangible assets...Definition Intangible Assets. Description.

Intangible Assets are non-physical assets. Common examples of intangible assets include brands, reputation, copyrights, patents, trademarks, trade secrets, know-how, goodwill. In accounting, intangibles are considered Non-current Assets.


Intangibles, intangible assets, knowledge assets and intellectual capital are more or less synonyms. All are widely used – intangibles specifically in the accounting literature, knowledge assets by economists and intellectual capital predominantly in the management literature.


According to Baruch Lev there are three main “nexuses” of sources of intangibles (often a particular intangible asset is created by a combination of these sources):

  • Discovery (innovation).

  • Organizational practices.

  • Human resources.

Intangibles have special characteristics:

  • Upside, value-increasing characteristics:

    • Intangible assets are non-scarce. Deployment of an intangible asset is possible at the same time in multiple uses.

    • Intangibles increase in value when used. This is also referred to as scalability: intangibles value increases when the scale in which they are used increases. Intangibles are not subject to diminishing returns as are tangible assets, but have increasing returns.

    • Intangibles have strong network effects. Although not exclusively applicable to intangibles, network effects are characteristic for intangibles in the sense that intangibles often form the core of important networks.

    • Intangibles create future value. All intangibles are future-oriented. (Because of this they are traditionally ignored by traditional accounting systems – conservatism concept, materiality concept).

  • Downside, value-decreasing characteristics:

    • Intangibles are difficult to manage and to exclusively control.

      • Taking full advantage of the tacit knowledge residing in employees is more difficult than exploiting the value of a building or a machine to it’s maximum.

      • Copying or re-engineering of intellectual assets is often relatively easy.

      • Limited ability to protect by property rights.

      • Cost accounting systems are not well geared towards intangible assets and are even wholly inaccurate for managing intangible assets-intensive corporations.

    • Intangibles cannot be owned (except legal property rights).

    • Intangibles investments are typically more risky. Due to the fact that intangibles play the most dominant role in early stages of the innovation process. Proper management can deal with this – i.e. R&D alliances, diversified innovation project portfolios.

    • Intangible assets are nonphysical and therefore inherently difficult to trade.

      • Legal protection is weak.

      • Large sunk costs, low marginal costs.

      • Open exchanges for intangibles are in their infancy.

    • Intangibles cannot directly be measured.

    • Valuing intangibles is difficult.

    • Intangibles are not evidenced by financial transactions (as tangibles are).

Importance of Intangibles

Intangible assets or intellectual assets are particularly relevant for the Economy as a whole, Organizations, Strategy, Finance, and Accounting.

Intangibles have been around since the dawn of civilization. Due to certain factors, including increased competition (globalization, deregulation) and the advent of information technology (notably the internet), corporations and the basis of competition amongst them has changed. This combination of factors catapulted the relative significance of intangible assets in the eighties and nineties of the 20th century compared to their tangible peers. Intangibles are now the major value drivers of businesses in our modern economy.

  • In 1978, 5% of all assets were intangible.

  • In 1998, 72% of all assets were intangible.

  • Currently, 75-85% of all assets are intangible.


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Intangible Assets Special Interest Group


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Best Practices - Intangible Assets Premium
  Key Concepts in Managing Intangible Organizations
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Expert Tips - Intangible Assets Premium

Resources - Intangible Assets Premium

Management Accounting of Intangible Assets

This presentation provides information about intangible assets and the effective management/accounting of these assets. The presentation includes the ...
Usage (application): Intangible Assets, Intellectual Capital Measurement
 

Managing Intangible Assets in Higher Education

1. Agenda
2. Growing Importance of Intangible Assets
3. Necessity to Actively Manage IPR
4. Research on Intangible Assets
5. Defin...
Usage (application): Intellectual Capital, Higher Education, Higher Education
 

Knowledge Management, Organizational Learning and Intellectual Capital

Presentation about organizational knowledge, learning and intellectual capital. The presentation includes the following sections:
1. Introduction...
Usage (application): Intellectual Capital, Knowledge Management, Organizational Learning
 

Accounting for Intangible Assets

Presentation about Intangible Assets and How to Measure, Manage and Account for Intangible Assets. The presentation includes the following sections: Usage (application): Accounting of Intangibles, Valuation of Intangibles, Controlling, Intangible Assets
 

USGAAP versus IFRS on Intangibles Accounting

This presentation compares USGAAP and IFRS, and includes the following sections:
1. Presentation Overview
2. Executive Summary
3. Progr...
Usage (application): Intangible Assets, Accounting, USGAAP, IFRS
 

Business Combinations, Intangibles and Goodwill

Presentation about Business acquisitions and the management of intangibles, with a special emphasis on goodwill. The presentation includes the followi...
Usage (application): Intangible Assets, Business Acquisitions, Accounting Treatment, Goodwill
 

Introduction and Summary of Intangible Assets (IAS38)

Accounting treatment of intangible assets:
- Identifiable (seperable, legal right)
- Non-monetary Assets (non-cash)
- Without Physical ...
Usage (application): Initial Understanding of Intangible Assets, Accounting Treatment
 
 

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Compare also: Edvinsson’s Skandia Navigator  |  Sveiby’s Intangible Assets Monitor  |  M'Pherson's Inclusive Value Measurement  |  IC Rating  |  Amortization  |  Tangible Assets  |  Tacit Knowledge  |  Relational Capital  |  Social Capital  |  Tertiary Sector  |  Sustainable Competitive Advantage
 

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