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    Intangible Assets

    According to the FASB, intangible assets are assets (not including financial assets) that lack physical substance.  Intangible assets have value based on the rights and privileges granted to the company using them, such as patents, copyrights, trademarks, trade secrets, franchise or license agreements, computer software, goodwill, and some development costs. Although financial assets such as bank deposits and bonds lack physical substance, they are not considered intangible assets. Financial assets are the right to some cash or cash equivalent in the future; whereas intangible assets are a right to something that may generate value for its owner through use. Most intangible assets generate value over more than one year, and are therefore recognized as long-term assets.  

    Identifiable Intangible Assets

    Identifiable intangible assets are assets that result from a contractual or legal right and are a nature of such that they can be alienated (that is, they can be separated from a company and sold, transferred, licensed, rented or exchanged).


    Identifiable intangible assets are recognized on the balance sheet when they are purchased. When identifiable intangible assets are created internally, they are recognized when they become enforceable through a contractual or legal right, for example, at the time that the patent is actually granted. 

    Initial Measurement

    When identifiable intangible assets are purchased, they are measured at cost. This cost also includes the costs associated with bringing the intangible into use, such as legal fees. When intangibles are purchased together for a single price, their cost is allocated based on their relative fair values. This is the same accounting treatment as lump sum (or basket) purchases of property, plant and equipment. 

    When identifiable intangible assets are developed internally, they are typically measured by the costs associated directly with bringing the intangible asset into use, such as legal fees and government fees related to acquiring a patent. However, research and development costs related to creating intangible assets are never capitalized. GAAP requires that research and development costs are recorded as operating expenses in the period they are incurred. 

    Intangible asset classes are groups of intangible assets that are similar either by their nature or by their use in the operations of a company. Intangible assets are often presented together in classes on the balance sheet.

    Subsequent Measurement

    Limited-life intangibles are amortized over their useful life and intangible assets with an indefinite lifespan are not amortized at all. However, impairment can be recognized for both types of intangibles when the fair value of the intangible is less than its book value. Restoration of previously recognized impairment is not permitted.  


    Goodwill is an intangible asset that is not readily identifiable. Goodwill can only be recognized when one company is purchased by another company. When this occurs, the purchase price is allocated among all the assets and liabilities based on their fair value – these are called identifiable net assets. The amount of the purchase price in excess of the value of the identifiable net assets is recognized on the balance sheet as goodwill. Identifiable net assets also included identifiable intangible assets. 

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    BrainMass Categories within Intangible Assets


    Solutions: 30

    Goodwill is an intangible asset that has value that can not be separated from the value of a business as a whole.

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