Definition

Intangible assets are assets that do not have a physical presence and cannot be felt or touched but they add value to a business. Intangible assets are often long-term as they can be used for more than a year. These can be divided into two broad categories: intellectual property and goodwill.Intellectual property can be for a trademark, patent, and licensing agreements. When a company holds intellectual property rights for any of these, another cannot copy it.Goodwill can include various factors that influence a brand’s value. Some examples include the reputation of the business, customer base, strategies, etc.

Example

Examples of intangible assets include goodwill, copyrights, patents, brand recognition, trademarks, and customer lists.

Why it matters

Intangible assets are often considered more valuable than tangible assets for any business. These can offer a strong competitive advantage to a company and determine how the business can offer value to customers and other stakeholders. For example:a. patents can help a company in protecting some of its inventions from being exploited by competition. b. business goodwill and brand recognition can aid in sales, building customer trust, and increase loyalty.

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