Intangible assets lack physical substance and so it is difficult to estimate their value. A few intangible assets are: patents, copyrights, franchises, goodwill, trademarks, long-term contracts for sourcing raw materials, etc. Methods of valuation of intangible assets have been modified significantly in the recent times in order to meet the norms of the accounting standards. In recent years, three factors have changed the way financial statement users view intangible assets, especially Intellectual Property (IP)—newly issued financial accounting standards, the rise (and fall) of many companies, whose main assets were intangible, and the increase in objective external evidence of the value of IP. The global business requirement has necessitated, the so far unrecognized but now being valued, intangible assets as professional and have highlighted them in the accounting and financial statements. This article analyzes the emerging multiple uses of these assets, their fair valuation to recognize in the financial statements and their role in the enhancing the organizational values.

Intangible assets include patents, copyrights, franchises, goodwill, trademarks, trade names, etc., which do not carry physical properties. According to US GAAP, these assets are amortized to expense over 5 to 40 years, with the exception of goodwill. Some assets, such as websites, are treated differently in different countries and may fall under either tangible or intangible assets.

Intangible assets are the identifiable non-monetary assets, without physical substance. An asset is a resource that is controlled by the enterprise as a result of past events (for example, purchase or self-creation) and from which, future economic benefits (inflows of cash or other assets) are expected. Thus, the three critical attributes of an intangible asset are: (IAS 38.8) Identifiability, control (power to obtain benefits from the asset) and future economic benefits (such as revenues or reduced future costs).

Tangible assets often have intangibles associated with them. This is why in Figure 1, there is an overlap between a firm's tangible and intangible assets. There are patents associated with many durable goods, a car, or airplane for instance, is a virtual repository of patented technologies. The car or airplane also will carry brands, trademark and copyrights. (e.g., on the owner's manuals). These intangibles need not be the same intangibles that the firm might develop and market independently. General Motors (GM), for instance, has a large portfolio of IP that it licenses (e.g., trademark on older vehicles) separately, apart from the patents and trademarks in the firm's current product offerings. This is how Revell can make toy models of Corvettes. Revell licenses the right from GM. Otherwise, Revell would have to make models of a more generic Fun Car.

Accounting World Magazine, Fair Value Accounting, Organizational Performance, Intellectual Property, Accounting Standards, General Motors, Patented Technologies, Non-Monetary Assets, Intangible Assets, Future Costs, Franchises, Trademarks, Proto Assets.