3.4.3 Intangible Assets Notes

Intangible Assets: Non-Physical Assets with Long-Term Value

1. Consider your local bakery, all their physical essentials are obvious: a storefront, inventory, and equipment.
2. But what about the non-physical elements that make the business unique?
3. The smile on the owner's face, their expertise in kneading bread, their secret recipe for your favorite sourdough.
4. These are your intangible assets, the invisible yet invaluable resources that drive growth and differentiate businesses from competitors.

What Are Intangible Assets?

1. They include:
   1. Patents
      1. A patent is a legal right granted by a government to an inventor, giving them exclusive rights to make, use, or sell an invention for a certain period (usually 20 years).
      2. It protects new and useful inventions, such as products, processes, or machines.
   2. Logo
      1. A logo is a unique design, symbol, or emblem representing a company, brand, or organization.
      2. It is used for brand identity and recognition in the marketplace.
   3. Copyrights
      1. Copyright is a legal protection granted to creators of original works, such as books, music, movies, software, and art.
      2. It gives the creator exclusive rights to reproduce, distribute, and display their work for a specific period (usually the creator’s lifetime plus 70 years in many countries).
   4. Brand Value
      1. Brand value refers to the financial worth or perception of a brand in the market.
      2. It is determined by factors such as customer loyalty, reputation, market position, and financial performance.
      3. High brand value means a brand is widely recognized and trusted.
   5. Self-Made Software
      1. Software that is developed in-house by an individual or company rather than being purchased from external vendors.
      2. It can be proprietary (owned and used exclusively by the creator) or open-source (shared with the public).
   6. Trademarks
      1. A trademark is a recognizable sign, symbol, word, or phrase legally registered to represent a brand, product, or service.
      2. It prevents others from using similar marks that might cause confusion.
   7. Goodwill
      1. Goodwill is an intangible asset that represents the value of a company's reputation, customer relationships, and brand recognition.
      2. It often arises when a company is acquired for more than its tangible assets and liabilities.