intangible asset

intangible asset
= invisible asset
An asset that can neither be seen nor touched. The most common of these are competencies, goodwill, and intellectual properties such as patents, trademarks, and copyrights. Goodwill is probably the most intangible and invisible of all assets as no document provides evidence of its existence and its commercial value is difficult to determine. However, it frequently does have very substantial value as the capitalized value of future profits, not attributable purely to the return on tangible assets. While goodwill is called either an intangible asset or an invisible asset, such items as insurance policies and less tangible overseas investments are usually called invisible assets. Intangible assets are increasingly seen as the key to competitive advantage and the market value of a firm ( book value, intellectual capital).
The accounting treatment for intangible assets has been a controversial topic. Items of intellectual property, such as brands and publication titles, have appeared on the balance sheets of well-known companies identified as intangible assets, separate from goodwill. However, this was not in accordance with the requirements of Statement of Standard Accounting Practice 22, which stated that goodwill has either to be written off immediately to reserves or amortized over a period of years to the profit and loss account. Financial Reporting Standard 10, Goodwill and Intangible Assets, was issued in 1997 and resolved many of the controversies. Under the Companies Act (1985) intangible assets is a main heading that should appear on the face of the balance sheet. The following subheadings are required but may be shown either on the face of the balance sheet or in the notes: research and development costs; concessions, patents, licences, trademarks, and similar rights and assets; goodwill; payments on account. The relevant International Accounting Standards are IAS 22, Business Combinations; IAS 36, Impairment of Assets; and IAS 38, Intangible Assets.

Accounting dictionary. 2014.

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