Intangible assets

An intangible asset is anything that a company owns that isn’t physical.

Decades ago, the majority of assets were either buildings and machinery – often referred to as plant, property and equipment (PPE) – or financial assets such as cash or securities. These are known as tangible assets. However, over time intangibles have grown to become a greater proportion of assets for many firms.

In some sectors, intangible assets may now be a far more significant part of a company’s value than tangible assets, even though much of this may not be fully reflected in its accounts. Valuable (and sellable) intangible assets include intellectual property, such as patents, copyrights and trademarked brands. Since the money that a firm spends on creating and maintaining these assets is usually classed as an expense for accounting purposes, these cumulative value of these outgoings is generally not recorded in the balance sheet (let alone any additional value created over and above the initial outlay). This differs from capital expenditure on physical assets, which will be recorded.

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