Definition
Intangible Assets
Intangible assets are non-physical assets with economic value, such as patents, trademarks, software, licences and goodwill.
Intangibles appear on the balance sheet when they can be reliably measured, typically when purchased or acquired in a business combination. Internally generated intangibles like brands are usually not capitalised under Ind AS, except for qualifying development costs.
Finite-life intangibles are amortised, while indefinite-life ones like goodwill are tested for impairment. The growing share of intangibles in modern businesses means traditional asset-based valuation often understates the true worth of technology and brand-heavy firms.
Related terms
- AmortisationAmortisation is the systematic write-off of the cost of an intangible asset, such as software, patents or goodwill, over its useful life.
- GoodwillGoodwill is the premium a company pays to acquire another over the fair value of its identifiable net assets, recorded as an intangible asset.
- ImpairmentImpairment is the write-down of an asset's carrying value when its recoverable amount falls below what is recorded on the balance sheet.
- Capitalisation (Costs)Capitalisation is recording an expenditure as an asset on the balance sheet rather than an immediate expense, to be written off over future periods.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.