What are Intangible Assets? Examples and Types in Business

Intangible assets are the unseen drivers of value in any business. Unlike physical assets such as buildings or equipment, they represent the non-physical elements that give companies a competitive edge—like brand reputation, intellectual property, and software. 

Here, we’ll provide intangible assets examples, explore valuation methods, and solve the challenges businesses face when assessing their worth.

Key takeaways

• Intangible assets are non-physical resources that provide long-term business value.
• Common examples include trademarks, copyrights, patents, goodwill, and software.
• Unlike tangible assets, they can be harder to measure or value due to their non-physical nature.
• Intangible assets are typically noncurrent assets, meaning they provide benefits over more than one accounting period.
• There are three main valuation approaches: cost, income, and market.
• Accurate valuation helps to improve financial reporting, forecasting, and decision-making. Intuit QuickBooks Online Advanced makes it easy.

What are intangible assets?

Intangible assets are identifiable, non-physical resources owned by a business that contribute to its future economic benefits.

They can be created internally, such as when a company builds brand recognition through marketing, or develops a secret recipe. Alternatively, they can be acquired externally through purchase or merger, such as when a business buys another company to gain its patents, customer lists, or goodwill.

Key characteristics of intangible assets:

• No physical form (cannot be seen or touched)
• Provide measurable or expected future value
• Often protected by legal rights such as trademarks or patents
• Usually recognized as non-current assets on the balance sheet

VAT tip for businesses in the Philippines: Fees and royalties related to certain intangibles (e.g., licenses, franchise fees) can have VAT implications. Keeping clean records of these transactions helps with compliance and reporting. Learn more about VAT tracking with Intuit QuickBooks for a streamlined workflow.

What’s the difference between tangible vs intangible assets?

Tangible and intangible assets differ in form, valuation, and how you should treat them in accounting.

Tangible assets:

• Physical in nature (e.g. machinery, land, buildings, vehicles)
• Depreciate over time due to wear and tear

Tangible asset example: A company’s factory or delivery truck used for operations

Intangible assets:

• Non-physical (e.g. brand recognition, software, patents)
• Amortized rather than depreciated

Intangible assets example: A retailer’s franchise license and trademark that allow it to trade under a well-known brand in a defined territory.

Why both matter for valuation: Leaving out either category can understate your true market position and skew cash flow forecasts. Strong brands, franchise rights, or customer contracts can affect your recurring revenue, just like factories and fleets affect capacity and cost. 

Types of intangible assets in business

Under Philippine Financial Reporting Standards (PFRS)—which align with IFRS—common categories of intangible assets include:

• Trademarks and trade names: Distinctive signs or logos.
• Patents: Exclusive rights for inventions or innovations that can be licensed for royalties.
• Copyright: Legal rights over creative works such as music, books or software code.
• Franchises and licenses: Rights to operate under a proven model or use specific technology or know-how. This is common in PH food and retail businesses.
• Customer relationships and contracts: Value from recurring contracts or high-retention accounts (e.g., BPO clients).
• Software and databases: Purchased or internally developed systems that support operations and analytics.
• Research and development (R&D) costs (if capitalized): Costs meeting recognition criteria under IFRS standards.
• Domain names and digital assets: Online identifiers and content that hold marketing or operational value.
• Goodwill: Arises when a business’ purchase price exceeds the fair value of their identifiable assets.
• Intellectual property (IP): A broader term covering patents, copyrights, designs, and related rights.

Methods to value intangible assets

Since intangible assets lack physical form, figuring out their value relies on analytical approaches. There are three primary methods used:

Cost approach

This method measures the value, based on the cost to recreate or replace the asset.

• Example: Estimating the value of a custom-developed software system based on development hours and licensing costs.
• Use: Effective when no market data or income stream is available.

Income approach

This approach determines value based on expected future income from the asset, discounted to present value.

• Example: Calculating the present value of future royalties from a patent.
• Use: Commonly used for intellectual property and customer relationships. It also improves budgeting and cash flow forecasting.

Market approach

This method estimates value by comparing the asset with similar ones sold in the marketplace.

• Example: Benchmarking the value of franchise territories by referencing recent sales of comparable territories in similar locations.
• Use: Best when there are active markets or benchmark transactions available.

What are the key challenges in valuing intangible assets?

There are challenges when it comes to valuing intangible assets, especially for small and medium-sized businesses that may not have the tools for a detailed analysis.

Common challenges include:

• Difficulty in measuring future benefits: It can be hard to estimate how much future income.
• Lack of comparable market data: Many intangibles are unique, which makes market comparisons difficult.
• Risk of overvaluation or impairment: Market shifts or poor assumptions can lead to inflated values.
• Limited expertise and resources: Smaller firms may lack access to valuation specialists or robust accounting systems.
• Difficulty separating intangibles from the business as a whole: Some assets, like brand value or goodwill, are deeply tied to overall business performance.

Examples of intangible assets in business

The end result 

Intangible assets may be invisible, but their impact on business growth and market value is undeniable. Recognizing and properly valuing them helps owners attract investors, make better pricing and budgeting decisions, and align with PFRS.

With Intuit QuickBooks Online Advanced, you can track both tangible and intangible resources, monitor reports. Plus, it’ll keep you on top of innovations that simplify financial management.