Intangible Assets

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Definition Intangible Assets? Meaning.

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.

Forum Forum about Intangible Assets. Below you can ask a question about this topic, share your experiences, report a new development, or explain something. Key Concepts in Managing Intangible Organizations Governments, businesses and other institutions recognize the increasing importance of intangibles in the economy. The tangible economy (raw materials, machines and goods that are visible), is shifting... 18   13 comments Underestimating Intangible Values during Cost Cutting Intangible value is hard to measure. So often it is not measured. False conclusion: no measured value = no value. I observe the following pattern: - The primary method to increase profitability is r... 8   1 comments FiMIAM : Financial Method of Intangible Assets Measurement In order to overcome the weaknesses of Sveiby's Intangible Assets Monitor and other intangible assets measurements, Rodov and Leliaert have presented their Financial Method of Intangible Assets Measu... 6   🔥 Can Biodiversity Be Seen as an Intangible Asset? Could biodiversity be considered as an intangible asset and as example, wildlife protection as an intangible business?... 5   2 comments Intangible Assets and Growth of Companies How are intangible assets important for competitive growth and sustainable growth? Open to reactions...... 5   2 comments Start a new topic about Intangible Assets

Information Sources Various sources of information regarding Intangible Assets. Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops. Management Accounting of Intangible Assets Intangible Assets, Intellectual Capital Measurement This presentation provides information about intangible assets and the effective management/accounting of these assets. ... Managing Intangible Assets in Higher Education Intellectual Capital, Higher Education, Higher Education 1. Agenda 2. Growing Importance of Intangible Assets 3. Necessity to Actively Manage IPR 4. Research on Intangible As... Knowledge Management, Organizational Learning and Intellectual Capital Intellectual Capital, Knowledge Management, Organizational Learning Presentation about organizational knowledge, learning and intellectual capital. The presentation includes the following ... Accounting for Intangible Assets Accounting of Intangibles, Valuation of Intangibles, Controlling, Intangible Assets Presentation about Intangible Assets and How to Measure, Manage and Account for Intangible Assets. The presentation incl... USGAAP versus IFRS on Intangibles Accounting Intangible Assets, Accounting, USGAAP, IFRS This presentation compares USGAAP and IFRS, and includes the following sections: 1. Presentation Overview 2. Executive... Business Combinations, Intangibles and Goodwill Intangible Assets, Business Acquisitions, Accounting Treatment, Goodwill Presentation about Business acquisitions and the management of intangibles, with a special emphasis on goodwill. The pre... Introduction and Summary of Intangible Assets (IAS38) Initial Understanding of Intangible Assets, Accounting Treatment Accounting treatment of intangible assets: - Identifiable (seperable, legal right) - Non-monetary Assets (non-cash) -...

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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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