Intangible assets, or in other ways, are intangible assets. Must Every company have intangible assets, right? These intangible assets are essential if the company is to be sold. Because the calculated value is not only capital but also intangible assets, in this article, everything about intangible assets will be discussed. From the start of understanding, why it is essential for the company, characteristics, useful life, types, and so forth. Check out this article!
Definition of Tangible Assets
The definition of tangible assets refers to the assets of companies that are not physical and have the nature of long-term assets. That is, the company’s tangible assets are not intended to be sold someday. All tangible assets will be managed to generate profits for the company’s operations. Based on the definition of these tangible assets, it can be understood that their existence is essential for the company. However, there are several different forms and types of tangible assets. Look at tangible asset website for more information about tangible assets.
Why Are Intangible Assets Important for Companies?
If a company does not list intangible assets, it will affect the entire company. The level of importance is almost the same as tangible assets. Acquisitions of intangible assets are recorded and recognized at the invoice value plus all costs attached to obtaining the assets/rights. If expenses occur after the purchase of intangible assets, these costs can be charged to the current period, the same as tangible assets.
Say a company will be sold. So to determine the value of the company, not only based on capital alone, but also on calculating intangible assets. Even in one case, the amount of these intangible assets could be higher than the capital of the company itself. That is why intangible assets also affect your company’s financial statements.
Characteristics of Intangible Assets
There are three characteristics of intangible assets, namely:
- Lacking physical existence, getting value from the rights and privileges granted to companies that use them.
- It is not a financial instrument, producing its value from claims to receive cash or cash equivalents in the future.
- Long-term and subject to amortization, providing services over the years.
Supporting Characteristics of Intangible Assets
In addition to the main characteristics above, there are several supporting characteristics of intangible assets, such as:
- Obtained through development or purchased separately or combined with other assets.
- Indirectly used in company operations.
- Influenced by the activities of competitors.
- Has value to the company.
- The industrial age is not determined.
At the beginning of the acquisition of intangible assets or assets must be recognized at the acquisition cost, while for the next period, the intangible assets are reported at their carrying value. The acquisition cost of intangible assets is determined through the acquisition method. For intangible assets or assets obtained through cash purchases, the acquisition price is the amount of money paid. However, if the asset is accomplished through an exchange process with other assets, the acquisition value becomes the estimated market price of the asset used as an exchange.
The useful life of intangible assets
Generally, the useful life of intangible assets is not more than 20 years since they are used. In considering the useful life of intangible assets that must be considered are:
- Estimated use of assets by the organization and management efficiency.
- Product life cycle in general.
- Technological or technical obsolescence.
- The stability of the industry where assets are used and market trends for the products or services produced.
- Estimated use and efficiency of asset management.
- Estimated competitor’s actions.
- Expenditures for maintenance in terms of obtaining a useful life.
- The lifetime of an asset is dependent on the useful life of other assets.
Intangible assets can be in the form of rights attached to intellectual products where other parties use the facilities.
Some Rights Included in the category of Intangible Assets
The following will be notified of any rights regarding intangible assets in the company:
Given to the author or creator to sell, monitor, or publish the results of his work. Copyright can be sold to other parties with an agreed agreement. The acquisition cost includes the expenditure from the preparation to the handling of the copyright license until the copyright certificate is received.
Given to those who conduct research and discover new things to produce, sell, or supervise their findings within a specified period. The acquisition price covers all expenses, including research, development, drawing, trial, and patent fees, until the issuance of a patent certificate.
Copyright and the right to use the symbol of a product. The acquisition price of this trademark right includes the costs of planning, design, manufacturing of logos, or symbols, including trademark licensing until the trademark certificate is issued.
Use individual facilities from one party to another as a franchisee. The franchisee is only allowed to use franchise rights following the agreement, not entitled to sell the franchise rights to other parties. For the franchisor, the acquisition price of the franchise is the number of funds spent to get the franchise rights permit, while for the franchisor, the acquisition price is the price given to the franchisor.