INTANGIBLE ASSETS Flashcards
Intangible Assets
Definition: Intangible assets are non-physical assets that lack a physical form but hold value for a business or individual. They include rights, intellectual property, and other intangible benefits that can contribute to economic value.
Why are intangible assets difficult to value?
- They have a subjetive nature
- Not shown in the balance sheet
- They can artificially increase the value of a firm just before a purchase
Patents
Definition: Patents are exclusive rights granted to inventors by the government. They provide legal protection for a specific invention, allowing the patent holder to control its use and distribution for a limited period.
Purpose: To encourage innovation by providing inventors with a monopoly over their invention, promoting research and development.
Copyright Laws
Definition: Copyright laws grant creators exclusive rights to their original literary, artistic, and intellectual works. These rights protect the creators’ rights to reproduce, distribute, and display their work.
Purpose: To incentivize creativity and the production of original works by ensuring creators can benefit from their creations.
Goodwill
Definition: Goodwill represents the intangible value associated with a company’s reputation, customer loyalty, and brand recognition. It reflects the premium a business may command due to its strong market position.
Purpose: To capture the intangible value of a company’s brand and customer relationships, often arising from years of successful business operations.
Trademarks
Definition: Trademarks are distinctive symbols, logos, or names used to identify and protect a company’s products or services. They create brand recognition and prevent others from using similar marks.
Purpose: To safeguard a company’s brand identity and prevent confusion in the marketplace by providing exclusive rights to specific branding elements.
