The nine categories of intangible assets used by economists are described below. Those highlighted in italics are difficult to measure for ONS. The most recent data (2016) for the UK shows that intangible assets (measured and estimated) totalled £138 billion and tangible assets £148 billion which represents 23.4% of market sector gross value added (GVA).
Types of Intangible Assets
1. Computerised software
2. Computerised databases
3. Science and Engineering R&D (costs of new products and new production processes, usually leading to a patent or licence)
4. Mineral exploration (spending for the acquisition of new reserves)
5. Copyright and license costs (spending for the development of entertainment and artistic originals, usually leading to a copyright or license)
6. Other product development, design, and research expenses (not necessarily leading to a patent or copyright)
7. Brand equity (advertising expenditures and market research for the development of brands and trademarks)
8. Firm-specific human capital (costs of developing workforce skills i.e., on-the-job training and tuition payments for job-related education)
9. Organisational structure (costs of organisational change and development; company formation expenses)
Why are Intangible Assets important?
The short answer is because capital markets say so! Intangible assets account for 90% of the S&P and are seen as the key differences between firms. This growth has been very rapid: from 1977 to 2001 the ratio between tangible and intangible assets went from 1 to a peak of 7 at the height of the dot.com boom before falling back to 5. Even in 2000 intangibles accounted for four out of every five dollars of market value in the USA.
How can Opagio help?
Our Disruptive Innovation service enables firms to fully document their innovation expenditures and intangible assets to create an Intangible Asset Register. This Register can be used to explain to investors how the firm will deliver profitable growth over the next decade.