Intangible Asset
An asset that is not physical in nature. Corporate intellectual property (items such as patents, trademarks, copyrights, business methodologies), goodwill and brand recognition are all common intangible assets in today's marketplace. An intangible asset can be classified as either indefinite or definite depending on the specifics of that asset. A company brand name is considered to be an indefinite asset, as it stays with the company as long as the company continues operations. However, if a company enters a legal agreement to operate under another company's patent, with no plans of extending the agreement, it would have a limited life and would be classified as a definite asset.
Investopedia Says:
While intangible assets don't have the obvious physical value of a factory or equipment, they can prove very valuable for a firm and can be critical to its long-term success or failure. For example, a company such as Coca-Cola wouldn't be nearly as successful were it not for the high value obtained through its brand-name recognition. Although brand recognition is not a physical asset you can see or touch, its positive effects on bottom-line profits can prove extremely valuable to firms such as Coca-Cola, whose brand strength drives global sales year after year.
Related Links:
Intangible assets don't appear on balance sheets, but they're crucial to judging a company's value. The Hidden Value Of Intangibles
Asset performance shows how what a company owes and owns affects its investment quality. Testing Balance Sheet Strength
The P/B ratio can be an easy way to determine a company's value, but it isn't magic! Value By The Book
We go over how to determine whether a measure of this important but hard-to-price intangible asset is justified. Can You Count On Goodwill?
