Corporate intellectual property (patents, trademarks, copyrights, business methodologies), goodwill and brand recognition are all common intangible assets in today’s marketplace
Calculated intangible value is a method of valuing a company’s intangible assets.
This calculation attempts to allocate a fixed value to intangible assets that won’t change according to company’s market value
To find intangible asset value
The company should subtract the residual value from the recorded cost and then divide that difference by the useful life of the asset
Each year that value will be netted from the recorded cost on the balance sheet in the account called accumulated amortisation reducing the value of the asset each year
Sell of intangible asset
Goodwill is a premium paid over the fair asset value during the purchase of company, hence if is tagged to a company or business and can not be sold independently, whereas other intangible assets like licenses, patents etc can be sold or purchased independently
Measure of intangible asset
Calculate the difference between a company’s market capitalization and it’s stockholders equity as the value of its intellectual capital or intangible asset
Return on assets (ROA)
Average pre-tax earnings of a company for a period of time are divided by the average tangible assets of the company
Amortize intangible asset
The cost of all intangible assets developed internally should be charged to expense in the period incurred
If an intangible asset has a finite useful life, then amortize if over that useful life
The amount to be amortized is it’s, recorded cost, less any residual value
Intangibles are often developed internally without any direct measurable cost that can be capitalized
Use of intangible asset
1) selling intangible asset. Some general intangibles like business processes can be packaged and sold
2) use them to increase value in the business sale
3) license or assign assets like patents, copyright and trademarks
4) Amortize intangible asset
Branding is intangible asset
Intangible asset is other asset and not current asset
A Business records the cost of intangible asset in the assets section of its balance sheet only when it purchases in from another party and asset has finite life
The company transfers a portion of assets cost from the balance sheet to an expense on the income statement each accounting period
These intangible must usually be amortized (spread out) over 15 years
Amortization is used for intangible asset and depreciation is used for tangible asset
Amortization is needed in order to spread the total cost according to the agreement evenly over the life of terms, we amortize
Intangible asset is not physical, if exists a legal power
Time itself is an event that decreases a company’s proportion of intangible assets
A licensing right with a defined period period decreases in value year to year because the company that purchased the rights has increasingly less time to profit from this intangible asset
Software license is intangible asset
Intangible value is the present value of excess power of an entity over the normal rate of return
A company that fails to emphasise the importance of intangible assets ruins any competitive advantage they had in the market
