The assets that cannot be touched are known as intangible assets and the list includes brand value, Goodwill, intellectual property like trademarks, patents, copyrights; intangible assets is further divided into a few types like market-related, customer-related, contract-related and technology-related intangible assets which includes assets like logos, self-developed software, customer data, franchise agreements, Newspaper Mastheads, license, royalty, Marketing Rights, Import Quotas, Servicing Rights etc.
List of Intangible Assets
In this section, we will discuss the list of the common types of intangible assets. As we have already understood what are intangible assets all about, here we would like to explain the list of intangible assets with examples.
The following are some of the common types of Intangible Assets.
- Brand Equity
- Intellectual Property
- Licensing and Rights
- Customer Lists
- Research & Development
Most Common Types of Intangible Assets (List)
#1 – Goodwill
Goodwill is one of the most important types of intangible assets. When one company acquires another company by paying extra amount as premium for customer loyalty, brand value and other non-quantifiable assets, that premium amount is called Goodwill.
Goodwill is basically the difference between the value of tangible assets and the value paid during the acquisition of the company. Goodwill is a long-term and non-current asset which is not amortized, unlike other intangible assets that could be amortized over years.
Goodwill is only recorded in the balance sheet when one company acquires another company or two companies complete a merger. When a company acquires another company, anything which is paid beyond the net value of the company due to its brand reputation is called goodwill and would be recorded in the acquirer’s balance sheet. Goodwill is a separate line item from intangible assets.
Assume Company A wants to acquire Company B. Company B is having assets of USD $ 5 Million and liabilities of USD$ 1 Million. Company A paid USD $ 6 Million which is USD $ 2 Million is more the net value of USD $ 4 Million (USD $ 5 Million of assets minus USD $ 1 Million of liabilities), this extra premium USD $ 2 is called goodwill which was paid due to company B’s brand value, customer loyalty and good customer perception.
#2 – Brand Equity
Brand equity is another kind of intangible asset, which is derived from consumer perception for that company. It’s a marketing term that explains a brand value. It is a value premium which a company receives from its products or services as compared to another product of services in the same industry. This is one of the parts of the premium paid as Goodwill by one company to another company during acquisition.
It’s a kind of intangible asset of any company which we cannot touch but have commercial value, which is responsible to increase sales of the company’s products. Brand equity is also not a physical asset but determined by consumer perception and has an economic value which helps in increasing sales of the company products.
The consumer is willing to pay extra than the product’s worth to receive the value of the brand due to high brand equity. That is the reason brand equity would have economic value and considered as Intangible asset.
Apple, the cellphone manufacturer. The consumers all around the world are willing to pay a high amount of money as compared to Apple’s competitor cellphone maker, as consumer perception towards Apple phones is high due to its brand equity.
#3 – Intellectual Property
This is one of the important types of intangible assets which is a registration of creativity, it might be in technology or design. These are the most valuable assets of any corporation. It is also referred to as inventions or unique designs. These inventions or designs are legally protected by the owners from outside uses without consent.
The companies should be aware of the value of these intellectual properties same as another kind of physical property, as the value of the intellectual property are huge when it compares to physical property.
The value of these intellectual properties arises during joint ventures, sale of these assets or licensing agreements.
There are 4 different types of intellectual property which are as per below,
- Patents:- Protection of new technologies from using or developing by others. Example, Samsung wireless charging technology.
- Copyrights:- Protection of authorship from using and publishing by others. Example, Most of the books published in the world cover from copyrights, prevent others not to publish without consent of the author.
- Trademark:- Protection brand names, logo or unique designs of the company. Example, Logos or product designs are protected from trademarks.
- Trade Secrets:- Protection of secret information of a product from using by others.
The Secret formula of manufacturing of any product is covered under trade secrets.
#4 – Licensing and Rights
These are other kinds of intangible assets that are widely used in business. Licensing and Rights are the agreement between an intellectual property owner and others who are authorized to use those intellectual properties for their business purpose in exchange for an agreed payment which is called Licensing fee or Royalty.
A license gives the holder certain rights of using or generating revenue from someone else business or inventions.
All kind of food franchise which has a business license from the parent company to run the same kind of food business after paying a certain fixed or monthly payment.
#5 – Customer Lists
A list of the old customers is also listed in the Intangible assets of any company. It takes a long time to build a customer list and has significant future value for any business and this is the property of any business.
Customer lists help in future segment targeted marketing for new or the same products or services and help in gaining new businesses.
#6 – Research & Development
Results of Research & Development (R&D), patented or non-patented, are also come under intangible assets. R&D is a process of acquiring new technical knowledge of any product and uses it to improve existing products or develop new products in the market.
As we know that R&D is an expense and recorded in profit & loss account, but due to its economic value which would convert more sales for the company, R&D can be considered as intangible assets. Companies invest huge money on R&D due to its economic value which is important to improve existing products or develop new products.
- Intangible assets are not in physical form but have more value than physical assets.
- The intangible assets are difficult to value but companies should calculate the fair value of these kinds of assets.
- The intangible assets are created or acquired by the companies.
- Intangible assets that are self-created by the companies, would not be recorded in the balance sheet and have no book value.
- The main types of intangible assets are Goodwill, brand equity, Intellectual properties (Trade Secrets, Patents, Trademark and Copywrites), licensing, Customer lists and R&D.
- Usually, the values of intangible assets are not recorded in the balance sheet but once two or more companies come together via acquisition or merger, then in the acquired company’s balance sheets, the value of intangible assets would be recorded.
This has been a guide to the Intangible Assets List. here we discuss 6 common types of intangible assets including goodwill, brand equity, customers list, etc with examples. Here are the other articles in financing that you may like –