Which of the following is a type of intangible business property that is a protected by law?

The following are some of the common types of Intangible Assets.

1. Goodwill
2. Brand Equity
3. Intellectual Property
4. Licensing and Rights
5. Customer Lists
6. Research & Development

The assets that cannot be touched are known as intangible assets, and the list includes brand value, goodwill, and intellectual property like trademarks, patents, and copyrights; intangible assets are further divided into a few types market-related, customer-related, contract-related, and technology-related intangible assets which include assets like logos, self-developed software, customer data, franchise agreements, Newspaper Mastheads, license, royalty, Marketing Rights, Import QuotasImport quotas are a type of government-imposed restriction on the trading of a certain commodity. Such restrictions are either fixed in terms of the value or quantity of the product to be imported during a given time period (usually for one year). The government imposes such restrictions in order to benefit local producers.read more, Servicing Rights, etc.

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Source: Intangible Assets List (wallstreetmojo.com)

This section will discuss the list of the common types of intangible assets. As we have already understood Types of Intangible AssetsIntangible Assets are the identifiable assets which do not have a physical existence, i.e., you can't touch them, like goodwill, patents, copyrights, & franchise etc. They are considered as long-term or long-living assets as the Company utilizes them for over a year. read more we would like to explain the list of intangible assets with examplesSome of the most common intangible assets are logos, self-developed software, customer data, franchise agreements, Newspaper Mastheads, license, royalty, Marketing Rights, Import Quotas, Servicing Rights etc.read more.

Most Common Intangible Assets List

#1 – Goodwill

GoodwillIn accounting, goodwill is an intangible asset that is generated when one company purchases another company for a price that is greater than the sum of the company's net identifiable assets at the time of acquisition. It is determined by subtracting the fair value of the company's net identifiable assets from the total purchase price.read more is one of the most important types of intangible assets. When one company acquires another company by paying an extra premium for customer loyalty, brand value, and other non-quantifiable assets, that premium amount is called goodwill.

Goodwill is the difference between the value of tangible assetsTangible assets are assets with significant value and are available in physical form. It means any asset that can be touched and felt could be labeled a tangible one with a long-term valuation.read more and the value paid during the acquisition of the company. Goodwill is a long-term and non-current assetNon-current assets are long-term assets bought to use in the business, and their benefits are likely to accrue for many years. These Assets reveal information about the company's investing activities and can be tangible or intangible. Examples include property, plant, equipment, land & building, bonds and stocks, patents, trademark.read more which is not amortized, unlike other intangible assets that could be amortized over the years.

Goodwill is only recorded in the balance sheet when one company acquires another company or two companies complete a mergerMerger refers to a strategic process whereby two or more companies mutually form a new single legal venture. For example, in 2015, ketchup maker H.J. Heinz Co and Kraft Foods Group Inc merged their business to become Kraft Heinz Company, a leading global food and beverage firm.read more. When a company acquires another company, anything which is paid beyond the company’s net value due to its brand reputation is called goodwill and is recorded in the acquirer’s balance sheet. Therefore, goodwill is a separate line item from intangible assets.

Example

Assume Company A wants to acquire Company B. Company B has assets of USD 5 Million and liabilities of USD$ 1 Million. Company A paid USD 6 Million, which is USD 2 Million is more than the net value of USD 4 Million (USD 5 Million of assets minus USD 1 Million of liabilities). This extra premium of USD 2 is called goodwill which was paid due to company B’s brand value, customer loyalty, and good customer perception.

#2 – Brand Equity

Brand equityBrand equity is a business term referring to the value of an identifiable and well-known brand. Factors driving the brand value include consumer perception, satisfaction, and positive experience about its goods or services. By earning a reputation for superior offerings, brands experience sales and revenue growth.read more is another kind of intangible asset derived from consumer perception of that company. It’s a marketing term that explains a brand’s value. It is a value premium that a company receives from its products or services compared to another product or service in the same industry. This is one of the parts of the premium paid as goodwill by one company to another company during acquisition.

It’s a kind of intangible asset of any company that we cannot touch but have commercial value, which is responsible for increasing sales of its products. Brand equity is also not a physical asset but determined by consumer perception and has an economic value, which helps in increasing sales of the company products.

Due to high brand equity, the consumer is willing to pay extra than the product’s worth to receive the brand’s value. That is why brand equity would have economic value and be considered an Intangible asset.

Example

Apple, the cellphone manufacturer; The consumers worldwide are willing to pay a high amount of money compared to Apple’s competitors cellphone maker, as consumer perception towards Apple phones is high due to its brand equity.

#3 – Intellectual Property

It is one of the important intangible assets, which is a registration of creativity; it might be in technology or design. These are the most valuable assets of any corporation. It is also referred to as inventions or unique designs. The owners legally protect these inventions or innovations from outside uses without consent.

The companies should be aware that the value of these intellectual properties is the same as another kind of physical property, as the intellectual property’s value is huge compared to physical property.

The value of these intellectual properties arises during joint venturesA joint venture is a commercial arrangement between two or more parties in which the parties pool their assets with the goal of performing a specific task, and each party has joint ownership of the entity and is accountable for the costs, losses, or profits that arise out of the venture.read more, sale of these assets, or licensing agreements.

There are 4 different types of intellectual property which are as per below,

1. Patents:- Protection of new technologies from using or developing by others. For example, Samsung wireless charging technology.
2. Copyrights:- Protection of authorship from using and publishing by others; For example, Most of the books published in the world cover copyrights, preventing others from publishing without the consent of the author.
3. Trademark:- Protection brand names, logo, or unique designs of the company. For example, Logos or product designs are protected from trademarks.
4. Trade Secrets:- Protection of secret information of a product from using by others.

Example

The Secret Formula of the manufacturing of any product is covered under trade secrets.

#4 – Licensing and Rights

These are other kinds of intangible assets that are widely used in business. Licensing and Rights are the agreement between an intellectual property owner and others authorized to use those intellectual properties for their business purpose in exchange for an agreed payment, which is called Licensing fee or royalty.

A license gives the holder certain rights to use or generate revenue from someone else, a business, or inventions.

Example

All kind of food franchise which has a business license from the parent companyA holding company is a company that owns the majority voting shares of another company (subsidiary company). This company also generally controls the management of that company, as well as directs the subsidiary's directions and policies.read more to run the same kind of food business after paying a certain fixed or monthly payment;

#5 – Customer Lists

A list of the old customers is also listed in the Intangible assets of any company. It takes a long time to build a customer list and has significant future value for any business, which is the property of any business.

Customer lists help in future segment targeted marketing for new or the same products or services and help gain new businesses.

#6 – Research & Development

Results of Research & Development (R&D), patented or non-patented, also come under intangible assets. R&D is a process of acquiring new technical knowledge of any product and using it to improve existing products or develop new products in the market.

As we know that R&D is an expense and recorded in the profit & loss account, but due to its economic value, which would convert more sales for the company, R&D can be considered an intangible asset. Companies invest huge money in R&D due to its economic value, which is important to improve existing products or develop new products.

Conclusion

1. Intangible assets are not in physical form but have more value than physical assets.
2. The intangible assets are difficult to value, but companies should calculate the fair value of these kinds of assets.
3. The intangible assets are created or acquired by the companies.
4. Intangible assets self-created by the companies would not be recorded in the balance sheet and have no book value.
5. The main types of intangible assets are goodwill, brand equity, Intellectual properties (Trade Secrets, Patents, Trademark and Copyrights), licensing, Customer lists, and R&D.
6. Usually, the values of intangible assets are not recorded in the balance sheet. Still, once two or more companies come together via acquisition or merger, the value of intangible assets would be recorded in the acquired company’s balance sheets.

Recommended Articles

This article has been a guide to the Intangible Assets List. Here we discuss six common types of intangible assets, including goodwill, brand equity, customer list, etc., with examples. Here are the other articles on financing that you may like –

• Goodwill AmortizationGoodwill amortization refers to the process in which the cost of the goodwill of the company is expensed over a specific period of the time i.e., there is a reduction in the value of the goodwill of the company by the way of recording of the periodic amortization charge in the books of accounts.read more
• Tangible vs. IntangibleTangible refers to anything with physical existence, i.e., it can be seen, touched, or felt by a person, like furniture and a machinery. In contrast, intangible is anything that is non-physical and invisible; it cannot be touched or felt by a person—for instance, goodwill and trademark.read more
• Intangible Assets AmortizationAmortization of Intangible Assets refers to the method by which the cost of the company's various intangible assets (such as trademarks, goodwill, and patents) is expensed over a specific time period. This time frame is typically the expected life of the asset.read more
• Return on Net AssetsReturn on net assets determines the efficiency of the company's net assets to generate profit. It analyzes the income-generating ability of the net working capital and the fixed assets employed in the business.read more