Smart Books® educator Leaine Jones often discusses the various components of the Balance Sheet with her students. One of the asset types is intangible assets. Leaine explains this as:
What the business owns that has a monetary value but is not physical property
Some examples of intangible assets are:
- Patents and trademarks
- Goodwill (itemised in an existing business purchase)
- Customer databases
- Franchise licenses
- Intellectual Property (eg. brand recognition, unique processes and systems)
An intangible asset is abstract but can be a very valuable part of the business. If intangibles are noted on a business sale asset list ask for evidence (of the purchase or receiving of these) and seek professional advice on determining what is a fair market value. Intangible values may increase or decrease over time too – your accountant can provide guidance on how to treat these once on your own Balance Sheet.
Want to find out more?
Xero’s glossary explains the two groups. Our Accounting Concepts course curriculum could be just what you need to get more familiar and confident with accounting terms.