Depreciation

The gradual write-off of an intangible asset's cost over its useful life. Unlike depreciation (which applies to physical assets), amortisation spreads the expense of assets such as patents, software, and licences across the income statement over the period they generate value.

A cost approach valuation technique that estimates the fair value of an intangible asset as the current cost to create a functionally equivalent asset, less deductions for all forms of depreciation including physical deterioration (not applicable to intangibles), functional obsolescence, technological obsolescence, and economic obsolescence. The method is commonly applied to software, assembled workforce (when valued), and databases where the cost to recreate can be estimated from development effort, labour rates, and project timelines.

A form of asset value decline that can be economically remedied through repair, upgrade, or redesign at a cost that is less than the resulting increase in value. In the context of intangible assets, curable depreciation might apply to software requiring modernisation or a brand needing repositioning.

A form of asset value decline that cannot be economically remedied because the cost of correction exceeds the resulting increase in value, or because the cause is external and beyond the owner's control. In intangible asset valuation, incurable depreciation often arises from economic obsolescence, permanent market shifts, or fundamental changes in regulatory environment.

A physical asset with a finite monetary value, such as property, plant, equipment, inventory, or cash. Tangible assets are recorded on the balance sheet at cost less depreciation.

The accounting practice of recording an intangible expenditure as an asset on the balance sheet rather than expensing it immediately through the income statement. Under IAS 38, development costs may be capitalised when specific recognition criteria are met, whereas research costs must always be expensed.

The net asset value of a company as recorded on its balance sheet, calculated as total assets minus total liabilities. Book value often significantly understates the true worth of intangible-rich businesses because many intangible assets are not recognised under accounting standards.

The total value of a company's or fund's assets minus its liabilities. For investment funds, NAV represents the per-share or per-unit value.

What is the difference between tangible and intangible assets?

Tangible assets are physical items like machinery, property, and inventory. Intangible assets are non-physical items like patents, brands, software, and customer relationships that often represent the majority of a company's value.