What is an intangible asset?
Short Answer
An intangible asset is an identifiable non-physical asset that generates economic value — such as patents, brands, customer relationships, software, and proprietary data.
Full Explanation
Under accounting standards (IAS 38 and ASC 350), an intangible asset is defined as an identifiable, non-monetary asset without physical substance. To be identifiable, it must either be separable (capable of being sold, transferred, or licensed independently) or arise from contractual or legal rights. Common examples include patents and trademarks (legal rights), proprietary software and databases (separable assets), customer relationships and contracts (both contractual and separable), and brand names (separable through licensing). Intangible assets are distinguished from goodwill, which is a residual amount that cannot be separately identified. In modern economies, intangible assets represent the majority of corporate value — the Ocean Tomo study found that intangible asset value grew from 17% of S&P 500 market capitalisation in 1975 to over 90% by 2020. Despite this dominance, many companies do not systematically identify, measure, or manage their intangible assets, creating a significant gap between true enterprise value and what appears on the balance sheet.
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