INTANGIBLE ASSETS

Intangible Asset
An intangible asset is an identifiable non-monetary
asset without physical substance. Such an asset is
identifiable when it is separable, or when it arises from
contractual or other legal rights. Separable assets
can be sold, transferred, licensed, etc.
An intangible asset is an asset that is not physical in
nature.
Examples of intangible assets include computer
software, licenses, trademarks, patents, films,
copyrights and import quotas.
Key Terms:
An intangible asset is an asset that is not physical in
nature, such as a patent, brand, trademark, or
copyright.
Businesses can create or acquire intangible assets.
An intangible asset can be considered indefinite (a
brand name, for example) or definite, like a legal
agreement or contract.
Intangible assets created by a company do not
appear on the balance sheet and have no recorded
book value.
Intangible assets only appear on the balance sheet
if they have been acquired. If Company ABC
purchases a patent from Company XYZ for
an agreed-upon amount of $1 billion, then
Company ABC would record a transaction for $1
billion in intangible assets that would appear under
long-term assets.
The $1-billion asset would then be written off over a
number of years via amortization. Indefinite life
intangible assets, such as goodwill, are not
amortized. Rather, these assets are assessed each
year for impairment, which is when the carrying
value exceeds the asset's fair value.
 Goodwill
 Goodwill is an intangible asset (an asset that’s non-physical but
offers long-term value) which arises when another company
acquires a new business. Goodwill refers to the purchase cost,
minus the fair market value of the tangible assets, the liabilities,
and the intangible assets that you’re able to identify. In other
words, goodwill is the proportion of the purchase price that is
higher than the net fair value of all the assets and liabilities
included in the sale. Some of the elements that produce goodwill
in business include the value of your company’s brand name,
good employee relations, strong relations with customers,
excellent location with a secure lease, proprietary technology,
and so on.
How to calculate goodwill
Learning how to calculate goodwill can be difficult,
as there’s no certainty that the amount you’ve
arrived at is ever going to be 100% accurate.
However, there is a relatively simple formula you can
use to get started:

Goodwill = Purchase price – (Fair Market Value of

Assets – Fair Market Value of Liabilities)
Franchises

 A franchise (or franchising) is a method of distributing

products or services involving a franchisor, who establishes
the brand’s trademark or trade name and a business
system, and a franchisee, who pays a royalty and often an
initial fee for the right to do business under the franchisor's
name and system.
 The practice of creating and distributing the brand and
franchise system is most often referred to as franchising.
 There are two different types of franchising relationships.
Business Format Franchising is the type most identifiable. In a
business format franchise, the franchisor provides to the
franchisee not just its trade name, products and services, but
an entire system for operating the business. The franchisee
generally receives site selection and development support,
operating manuals, training, brand standards, quality control,
a marketing strategy and business advisory support from the
franchisor. While less identified with franchising, traditional or
product distribution franchising is larger in total sales than
business format franchising. Examples of traditional or product
distribution franchising can be found in the bottling, gasoline,
automotive and other manufacturing industries.
Tradenames
 A trade name is the official name under which an individual
as a sole proprietor or a company chooses to do business. A
trade name is commonly known as a doing business as (DBA)
name. Registering a trade name legally is an important step
in branding for a company, but it doesn't provide an
unlimited brand name or legal protection for the use of the
name. State laws vary on requirements for registering a trade
name, but most states require registration either with the state
government or through a county clerk’s office. The practical
function of registering a trade name is primarily for
administrative and accounting purposes, such as filing a
corporate tax return with the Internal Revenue Service (IRS)
which is in addition to your personal income tax return.
Trademark
A trademark is a more significant step identified with
establishing brand recognition in the marketplace. A
trademark can be associated with or it can be part
of your trade name and can be used to provide
legal protection for the use of names, logos,
symbols, or company slogans. Two easily recognized
examples of trademarks are Nike's swoosh symbol
and Coke's "Coca-Cola" written in its distinctive
script. Trademarks are easily recognized as they are
accompanied by the trademark symbol—™.
Patent
What is a patent?
A patent is an exclusive right granted for an
invention, which is a product or a process that
provides, in general, a new way of doing
something, or offers a new technical solution to
a problem. To get a patent, technical
information about the invention must be
disclosed to the public in a patent application.
Copyright
What is copyright?
Copyright (or author’s right) is a legal term used
to describe the rights that creators have over
their literary and artistic works. Works covered by
copyright range from books, music, paintings,
sculpture, and films, to computer programs,
databases, advertisements, maps, and technical
drawings.
Cash Value Intangible Asset
Security Deposit
1. A security deposit is money that is given to a landlord,
lender, or seller of a home or apartment as proof of intent to
move-in and care for the domicile. Security deposits can be
either be refundable or nonrefundable, depending on the
terms of the transaction. A security deposit is intended as a
measure of security for the recipient, and can also be used
to pay for damages or lost property.
2. Security deposits serve as an intangible measure of security,
or as a means of tangible security in the event of damages
or lost property.
Cash Surrender value
Cash surrender value is the amount left over after
fees when you cancel a permanent life insurance
policy (or annuity). Not all types of life insurance
provide cash value. Paying premiums could build
the cash value and help increase your financial
security.