Differences between tangible and intangible assets of a company

Intangible assets are those assets of a company that are not physically represented. That is, the money or machinery that a company uses for its activity are tangible assets, while the recognition or value of the brand would be an intangible asset.

According to the General Accounting Plan, these assets are “non-monetary, without physical appearance susceptible of economic valuation”. Which means that although they can not be seen or touched because of their immaterial nature, they do affect the value of your company.

What is an intangible asset, and what is not

 What is an intangible asset, and what is not

For an asset to be classified as intangible, it must meet various requirements. First, they must meet the definition of good or asset – that is, those elements controlled by your company – and also meet the criterion of asset recognition – which means that they have to give some benefit -. Finally, they must be identifiable, that can be sold or used by the company itself, or by other corporations, for a specific purpose.

On the other hand, it is necessary to clarify that human capital would not fall into this category. For everything analyzed so far, it could be. However, we lack the most important part. A small connotation that in this case acquires important relevance, and is that the effort of each worker is, in reality, of each of them. That is, you can not sell. In addition, it is not controllable by companies, so it can not be considered an asset owned by the corporation.

Finally, there would be a type of intangible asset that comes from other tangible assets. This is the case of the acquisition of a brand or company by another. The intangible asset comes from another tangible asset: contract law.

Classification of intangible assets

 Classification of intangible assets

Intangible assets can be classified into different groups:

  • According to your own identity. As they can be identified (such as trademarks and copyrights), or if they are not identifiable (advertising and organizational expenses).
  • By the way of incorporation to the company. They can be acquired, as is the case of exchanges or assignments, and can be developed in the company itself (development costs).
  • For your life period. They can be perpetual intangible assets, if the brand is renewable, or they can be limited by a contract (such as concessions).
  • Depending on whether they can be divided for sale. There are some intangible assets that are not susceptible to separation and others that can be separated and sold as well.
  • According to the accounting recognition. According to their registration they can be countable or not.

Finally, it is important to know that you can assign the right to use these intangible assets, such as patents and copyrights. This action can be used to finance us and obtain liquidity at a certain time, as a result of the transfer of those rights.

Anyway, certain intangible assets can have great market value, so we must value them conveniently during the process of transfer or sale. For example, a copyright can be exploited by another corporation and generate added benefits a posteriori. We must try to forecast the use and exploitation that a competitor can make on this intangible asset. If liquidity is needed, it may be better to use other alternative financing formulas that currently exist in the market, and that allow us to maintain ownership over corporate intangibles.

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