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Intangible Assets

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Chito jungoy
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21 views2 pages

Intangible Assets

Uploaded by

Chito jungoy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Intangible assets are non-physical, identifiable assets that provide long-term value to a business.

They are not tangible in nature (cannot be touched or felt) but have economic value due to their
legal, intellectual, or branding rights.

Characteristics of Intangible Assets:

1. Non-physical Nature: They do not have a physical substance.


2. Identifiable: Can be separated or distinguished from other assets.
3. Amortizable: Their cost is usually spread over their useful life.
4. Economic Value: They generate benefits for the business over time.

Examples of Intangible Assets:

1. Goodwill

 Definition: The value arising when a company acquires another business for a price
higher than the fair value of its net assets. Goodwill represents factors like reputation,
customer loyalty, and brand recognition.
 Example: A company buys another company for $5 million when the net assets are
worth $4 million. The $1 million difference is goodwill.

2. Trademarks and Trade Names

 Definition: Legal protection for a brand name, logo, slogan, or symbol associated with a
company's goods or services.
 Example: The Nike "Swoosh" logo or Coca-Cola’s brand name.

3. Patents

 Definition: Exclusive legal rights granted for an invention, allowing the patent holder to
produce, use, or sell the invention for a specified period.
 Example: A pharmaceutical company’s patent on a new drug.

4. Copyrights

 Definition: Legal rights given to creators of original works like books, music, software,
or movies, protecting the use and reproduction of these works.
 Example: Copyright protection on J.K. Rowling's "Harry Potter" series.
5. Franchises

 Definition: Rights granted to a franchisee to operate a business under the franchisor’s


trademark, business model, and branding.
 Example: McDonald’s franchise rights purchased by an individual operator.

6. Software Licenses

 Definition: Rights to use specific software for business purposes, often purchased from
software developers.
 Example: A company purchasing a Microsoft Office license.

7. Customer Lists

 Definition: A compiled list of clients or customers, which has value because it provides
access to existing or potential revenue sources.
 Example: A business purchasing a competitor’s customer database.

Summary:

Intangible assets are essential for modern businesses, especially in sectors like technology,
media, and branding. While they lack physical form, their value often surpasses tangible assets
due to their potential to drive long-term profitability.

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