Sunday, June 24, 2018

Intangible Assets

An intangible asset exists only on paper or in accounting transactions; it is not a physical item or a receivable.  Instead, it is an intangible item, such as a patent, copyright, or goodwill.  (“Goodwill” represents the price paid for the assets of a business over and above the book value.)

Ownership of an intangible asset often leads to some type of income generation or cost savings.  Intangible assets, therefore, have value, and they are listed on the balance sheet as non-current assets.

Intangible assets are written off slowly over time in a similar manner as fixed assets.  They are gradually written down or “amortized” over their existence.  For example, a patent would be amortized until its expiration.  Similarly, expenditures made for loan costs or franchise fees are generally capitalized and amortized as well.

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