intangible assets

Examples of intangible assets in the following topics:

• Valuation of Intangible Assets

  • The valuation of intangible assets are primarily derived from transactions involving intangible assets.
  • Since few sales of intangible assets are observable, benchmarking the value of intangible assets can be difficult.
  • If an intangible asset is internally generated, its cost is immediately expensed.
  • If a company incurs legal costs to successfully defend an intangible asset, those costs are capitalized and increase the value of the intangible.
  • Goodwill is an excellent example of how intangible assets are valued.

• Limited-Life Impairment

  • Limited-life intangibles are amortized throughout the useful life of the intangible asset using either the units of activity or the straight-line method.
  • They are classified into categories: either purchased vs. internally created intangible assets; and limited-life or indefinite-life intangible assets.
  • Limited-life intangibles are intangible assets with a limited useful life, such as copyrights, patents and trademarks
  • Examples of intangible assets with a limited-life include copyrights and patents.
  • The amortization amount is equal to the difference between the intangible asset cost and the asset residual value.

• Amortization of Intangible Assets

  • The costs of intangible assets with identifiable useful lives are amortized over their economic/legal life.
  • Amortization is the systematic write-off of the cost of an intangible asset to an expense, which effectively allocates a portion of the intangible asset's cost to each accounting period in the economic or legal life of the asset (an amortization expense).
  • Only recognized intangible assets with finite useful lives are amortized.
  • If an intangible asset is internally generated in its entirety, none of the costs related to the asset are capitalized.
  • An intangible asset is amortized if the asset has an identifiable useful life.

• Analyzing Intangible Assets

  • Examples of intangible assets with identifiable useful lives include copyrights and patents.
  • Trademarks and goodwill are examples of intangible assets with indefinite useful lives.
  • Some costs with respect to intangible assets must be capitalized rather than treated as deductible expenses.
  • Some types of intangible assets are categorized based on whether the asset is acquired from another party or created by the taxpayer.
  • Research and development (R&D) costs are not in and of themselves intangible assets.

• Characteristics of Intangible Assets

  • Intangible assets are identified separately on a company's financial statements, and come in two primary forms: legal intangibles and competitive intangibles.
  • Goodwill is technically an intangible asset, but is usually listed separately on a company's balance sheet.
  • Goodwill is a type of intangible asset that is acquired and recorded due to a business acquisition or combination rather unlike other intangible assets, which may be internally developed by the company.
  • Under US GAAP, intangible assets are classified into: Purchased vs.
  • Firms initially record intangible assets at cost, however only costs associated with the outright purchase in the acquisition of an intangible asset.

• Reporting Intangibles

  • Unlike tangible assets such as property, plant, and equipment, intangible assets derive their value from the rights and privileges granted to the company using them.
  • Assets such as bank deposits, accounts receivable, and long-term investments in bonds and stocks lack physical substance, but are not classified as intangible assets.
  • In most cases, intangible assets provide services over a period of years.
  • With internally developed intangibles, it is difficult to associate costs with specific intangible assets.
  • The accounting for intangible assets depends on whether the intangible has a limited or an indefinite life.

• Indefinite-Life Impairment

  • In accounting, intangible assets are defined as non-monetary assets that cannot be seen, touched or physically measured.
  • Under US GAAP, intangible assets are classified into: Purchased vs. internally created intangibles, and Limited-life vs. indefinite-life intangibles.
  • Since intangible assets are typically expensed according to their respective life expectancy, it is important to understand the difference between limited-life intangible assets and indefinite-life intangible assets.
  • Indefinite-life tangibles are not amortized because there is no foreseeable limit to the cash flows generated by those intangible assets.
  • Intangibles can also be classified as: legal intangibles or competitive intangibles.

• Types of Long-Lived Assets

  • The two major asset classes are tangible assets (e.g., buildings and equipment) and intangible assets (e.g. copy rights).
  • There are two major types of long-term assets: tangible and non-tangible.
  • Tangible assets include fixed assets, such as buildings and equipment.
  • Examples of intangible assets are copyrights, trademarks, patents and computer programs, financial assets-- including such items as accounts receivable, bonds and stocks-- and goodwill.
  • They are listed under the asset portion of the balance sheet.

• Assets

  • Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset.
  • Two major classes are tangible assets and intangible assets .
  • Tangible assets contain various subclasses, including current and fixed assets.
  • Current assets include inventory, while fixed assets include such items as buildings and equipment.
  • Examples of intangible assets are goodwill, copyrights, trademarks, patents, computer programs, and financial assets, including such items as accounts receivable, bonds and stocks.

• Total Assets Turnover Ratio

  • Examples of intangible assets are goodwill, copyrights, trademarks, patents, computer programs, and financial assets, including such items as accounts receivable, bonds and stocks.
  • Total assets turnover = Net sales revenue / Average total assets
  • Anything tangible or intangible that is capable of being owned or controlled to produce value, and that is held to have positive economic value, is considered an asset.
  • Tangible assets contain various subclasses, including current assets and fixed assets.
  • Current assets include inventory, while fixed assets include such items as buildings and equipment.