Tangible assets have both physical form and tradeable value. They range from computer equipment to real estate. Intangible assets have no physical form but can have income generating and therefore tradeable value.
Intangible assets: Things that are ‘owned’ through a legal title or contractual agreement. they either generate income or have the potential to generate income, directly or indirectly, and can therefore be bought, sold and valued.
Intellectual Property: In its simplest and purest form, Intellectual Property is defined as the ‘intangible property resulting from creative endeavours’. The legal form can vary – it can be a registered patent, a trademark or copyright. In some cases, even trade secrets can be formalised as intellectual property.
Intellectual property can have a great deal of added value. It can also increase dramatically in value over time, depending on how it is applied and managed. It is often a very significant business or personal asset – or has the potential to be.
So…the answer to the question of whether intellectual property is an intangible asset is a resounding ‘yes’. Is it a valuable intangible asset? It certainly can be!
Intangible Asset Valuation:
Intellectual property may be intangible, but the income it can generate and so it’s value to a personal or corporate financial portfolio is tangible. The intangible becomes tangible cash when given a value, or when it has directly generated income that can be reflected on a balance sheet.
For example, a balance sheet can show how much a person earned from their percentage of sales of a creative work – an income assured by their copyright – the copyright being the ‘intangible asset’. How much that copyright might generate in the future can be estimated to place a value on the copyright as an asset.
The value of a business trademark, or trade secrets, may be harder to quantify by past, current and projected income, but it can be valued using the average of multiple valuations.
TAT Accounting can assist owners of intellectual property who want to sell their asset, put a Rand Value on it.
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