Tangible vs Intangible Assets

Updated on January 3, 2024
Article byWallstreetmojo Team
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

Differences Between Tangible and Intangible Assets

The primary difference between tangible and intangible assets is that tangible assets have a physical existence and can be felt and touched. In contrast, intangible assets are the assets that do not have any physical existence and the same cannot be felt and touched.

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A tangible assetTangible AssetTangible assets are assets with significant value and are available in physical form. It means any asset that can be touched and felt could be labeled a tangible one with a long-term valuation.read more has a physical existence and a certain economic value. These physical resources are essential for smoothly conducting business operations and are not saleable. Some of the examples are:

  • Land & Buildings
  • Machinery
  • Furniture
  • Vehicles

Intangible assets do not have a physical existence but possess commercial value and act as a long-term resource to the firm. Some of the instances include:

  • Goodwill
  • Copyright
  • Patent
  • Trademark

Tangible vs. Intangible Assets Infographics

Let’s see the top differences between tangible vs. intangible assets and infographics.

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Key Differences

  1. A tangible asset is owned by an individual or organization and utilized for conducting business activities over a long period. Intangible assetsIntangible AssetsIntangible Assets are the identifiable assets which do not have a physical existence, i.e., you can't touch them, like goodwill, patents, copyrights, & franchise etc. They are considered as long-term or long-living assets as the Company utilizes them for over a year. read more are those which have an economic value and a specific life. These are considered earned over the hard work executed over a long period.
  2. The existence of tangible assets is essential for the functioning of an organization, but the non-existence of intangible assets will not have a widespread impact on a firm. It offers a cushion to those associated with the name it has made for itself in the industry.
  3. Tangible assets can be converted into cash since they can be viewed to the eye and can be weighed in monetary terms, whereas later are difficult to convert into cash immediately.
  4. Fire and accidents can destroy tangible assets or human negligence. In contrast, intangibles cannot be destroyed by fire or other disasters but by carelessness or any side effect of a business decision.
  5. The Book market value and the book value of a tangible asset change due to depreciationDepreciationDepreciation is a systematic allocation method used to account for the costs of any physical or tangible asset throughout its useful life. Its value indicates how much of an asset’s worth has been utilized. Depreciation enables companies to generate revenue from their assets while only charging a fraction of the cost of the asset in use each year. read more; Whereas in the case of an intangible asset, the market value changes, but the book value shall remain the same.
  6. The value of a tangible asset adds to the current market value, but the value gets added to the potential revenue and worth in the case of the intangible asset.

Tangible vs. Intangible Assets Comparative Table

BasisTangible AssetIntangible Asset
MeaningOwned by an Organization having monetary value and physical existenceAssets which are not existing visually but poses certain economic life and value
ValuationMonetarily possibleDifficult to measure in financial terms
Collateral AcceptanceIt can be accepted as collateral.Cannot be accepted as collateral
Value ReductionDepreciationAmortizationAmortizationAmortization of Intangible Assets refers to the method by which the cost of the company's various intangible assets (such as trademarks, goodwill, and patents) is expensed over a specific time period. This time frame is typically the expected life of the asset.read more

Final Thoughts

The company recorded both tangible and intangible assets in its books of accounts. Tangible assets are highly crucial for any organization since it aids in the smooth running of the operations; intangible assets help create the firm’s future worth. Though both have their pros and cons, they impact the functioning of an organization.

It is also essential to know that determining a company’s Tangible assets offers various benefits; the usefulness varies significantly across industries. E.g. in the case of hospitals or medical device manufacturers, intangible assets are far more valuable than tangible ones. On the other side, industries such as real estate would have intangible assets, but the tangible ones will provide the revenues they require for operations.

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This has been a guide to Tangible vs. Intangible Assets. Here we discuss the top differences between them and infographics and a comparative table. You may also have a look at the following articles –

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