What Are Intangible Assets?

Intangible assets generally fall into two buckets:

1. Identifiable intangibles that can be separated from the business or arise from legal rights (often recognised on the balance sheet under certain conditions).
2. Non-identifiable intangibles, such as internally generated goodwill or reputation, which typically aren’t recorded as assets unless acquired through a business combination.

Common examples of intangible assets

Typical intangible assets include:

• Software and licences (including capitalised development costs in some cases)
• Patents and trademarks
• Copyrights
• Customer lists and customer relationships (often from acquisitions)
• Brand value (usually recognised only when acquired, not internally generated)
• Goodwill (the premium paid when buying a business above the fair value of net assets)

The key idea: intangible assets create future economic benefits, even if they have no physical form.

How intangible assets are treated in accounting

Whether an intangible is recorded on the balance sheet depends on how it’s obtained and whether it meets recognition rules. In many cases:

• Purchased intangibles (like acquired software, patents, or customer lists) are more likely to be capitalised as assets.
• Internally generated items (like building a brand through marketing) are often expensed rather than capitalised.
• Goodwill typically arises only on acquisition.

Many intangibles are amortised over their useful life(similar to depreciation for physical assets), unless they are considered to have an indefinite life—then they may instead be tested for impairment.

Why intangible assets matter

Intangible assets can significantly affect:

• Valuation and investment decisions
• Profit reporting (through amortisation and impairment)
• Balance sheet strength and leverage ratios
• The “real” drivers of value in modern businesses (software, IP, brand, relationships)

They also require judgement: useful lives, impairment indicators, and classification can materially change reported results.

What’s the difference between intangible assets and goodwill?

Intangible assets are identifiable non-physical assets (like software or trademarks). Goodwill is the excess paid in an acquisition above the fair value of identifiable net assets and represents things like reputation, synergies, or expected future earnings.

Are employees or “team knowledge” intangible assets?

They can create value, but they’re generally not recognised as accounting assets because the business doesn’t control them in the same way it controls legally enforceable assets.

Do intangible assets affect cash flow?

Usually not directly at the time of amortisation because amortisation is a non-cash accounting charge. Cash impact occurs when the asset is purchased or developed (depending on how costs are treated).

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