Difference Between Tangible and Intangible
The primary difference between tangible and intangible is that tangible is something which a person can see, feel or touch and thus they have the physical existence, whereas, the intangible is something which a person cannot see, feel or touch and thus do not have any of the physical existence.
Assets are anything that has some value stored in it and which is also owned by a firm or an individual and is expected to provide future economic benefit. It is the most basic requirement of the business which is needed by the company or an organization for its smooth functioning. It is broadly classified as current assets and non-current assets. Non-current assets are then further classified into intangible and tangible assets.
What are Tangibles?
Tangible assets can be referred to as the long-term resources which are physical in nature and that are owned by an organization or the corporation, which has some economic value. Corporation acquires those assets to carry out its business operations smoothly and is usually not for sale. Examples for the same would be plants & machinery, buildings, vehicles, tools & equipment, furniture & fixtures, land, computers, etc. These assets mostly suffer from the risk of loss due to theft, fire, accident or any other such disaster. Tangible assets do have an economic life that is useful, after which it has the risk of becoming obsolete. Depreciation is the common method that has been incorporated by the firms to spread the part of that asset’s expense over its economic life.
What are Intangibles?
These assets are the long-term resources that are incorporeal in nature that is also owned by the organization, which have a certain commercial value. In this list, we can include trademark, goodwill, copyright, patent, brand, blueprint, Internet domains, intellectual property, licensing agreements, etc.
Tangible vs Intangible Infographics
Key Differences Between Tangible and Intangible
- Assets that are acquired by the organization which is having some monetary value and is materially present is known as tangible assets. Incorporeal assets that have a certain useful life, as well as economic value, are known as intangible assets.
- Tangible assets are the assets that are present with the organization or say with the company in their physical existence. On another hand, intangible assets are the assets that do not exist physically rather they are stated as abstract.
- While the value reduction for the tangible assets occurs depreciation, and for intangible assets, it occurs through amortization.
- Due to the major material presence in tangible assets those can be readily convertible into cash when required or in case of emergency but conversely, it would be a bit difficult to sell those intangible assets namely trademark or goodwill, etc.
- Salvage value or the scrap value is the residual value of the asset after it has been completely depreciated. Tangible assets have scrap or salvage value, but intangible assets as stated earlier do not have any kind of scrap or salvage value.
- Tangible assets as mentioned in the above table that those are accepted by the lenders or creditors while granting a loan to the firm, for example, granting property loans and mortgaging that property against that, such kinds of loans are called as secured loans. As opposed to this, intangible assets cannot be used by the organization or the firm as collateral value for the purpose of raising loans.
- The Cost of tangible assets can be easily determined whereas the cost of intangible assets involves complication as and is harder to determine.
|Basic Definition||Assets that have a physical existence and that can be touched and can be felt are known as Tangible Assets.||The opposite of the Tangible Assets is the Intangible Assets that don’t have or possess a physical existence and the same cannot be felt or touched.|
|Values||Tangible Assets have monetary value and the same is materially present.||Intangible Assets which are incorporeal those have some economic value and economic life.|
|Value Reduction||Tangible assets are depreciated.||Intangible Assets are amortized.|
|Form||Tangible assets possess physical presence.||Intangible Assets are abstract.|
|Scrap Value||Tangible assets when becomes obsolete can be sold in scrap||Intangibles do not have any scrap value.|
|Liquidation||Tangible assets are comparatively easy to liquidate.||Intangible assets don’t possess liquidation value as such.|
|External usage||Creditors and Banks do accept tangibles assets as collateral||These kinds of assets cannot be used as collateral as creditors and banks don’t consider the same.|
Both intangible and tangible assets are and must be recorded by the company as those are required by law and per accounting standards. While those tangible assets are very much and extremely important for the organization, as it helps them in the production of services and goods. On the contrary to that, intangible assets to assist the organization or the company in creating their future worth as for example if a company has a patent in creating a certain product then its revenue will not be affected soon as it will face less competition and thus this creates value for shareholders.
When comparing these assets, both have their cons and pros, but there is one more fact which is also true that intangible assets are much worthier as compare to the tangible ones.
They both have a similarity that they both have an existence at the face of a balance sheet. The Organization cannot survive without the tangibles and if those went for sale or liquidation it is almost as good as its nearing bankruptcy take an example of IL&FS (Infra Structure and Leasing company) that has been defaulting on its debt payment in the year 2018 is in trouble as its selling its tangible assets to survive. Further Intangibles also are important as stated above like patents, trademarks, etc. those help the organization is keeping the competition around it lesser. Customers’ loyalty is also one kind of intangibles like most of the sophisticated consumers see value in Apple which Apple admires and sees them as their value.
This has been a guide to the Tangibles vs Intangibles. Here we discuss the top differences between Tangible and Intangible Assets along with infographics and comparison table. You may also have a look at the following articles –