UNIT 6 - Intangible and Intangible Assets – INSTRUCTORS REFERENCE

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Tangible Assets: The best way to remember tangible assets is to remember the meaning of the word “Tangible” which
means something that can be felt with the sense of touch. Assets which have a physical existence and can be
touched and felt are called Tangible Assets. Tangible assets can include both fixed and current assets. Few examples of
such assets include furniture, stock, computers, buildings, machines, etc.
 
Intangible Assets: The opposite of Tangible Assets, Intangible Assets don’t have a physical existence and cannot be
touched or felt. Intangible assets can either be definite or indefinite, depending on the kind of an asset in question. A
few examples of such assets include goodwill, a patent, copyright, a trademark, a company’s brand name, etc.

Intangible Asset - An intangible asset is an asset that you cannot touch. Examples of intangible assets include 
copyrights, patents, trademarks, goodwill and so on. Often the market value of an intangible asset is far greater than the
market value of a company's tangible assets such as its buildings and equipment.
Accounting principles require that intangible assets be reported on a company's balance sheet at cost or less. Since
many intangible assets are not purchased, they may not have a reportable cost. As a result, many valuable intangible
assets are not even reported as assets on the company's balance sheet.

Copyright: An exclusive right granted by the federal government to publish and sell various works. In accounting a
copyright is recorded at its cost and is reported on the balance sheet as an intangible asset.

Trademark: An intangible asset that is reported at cost (or lower) on the balance sheet. It might consist of a name or a
logo. 

Difference between Tangible and Intangible Assets

 Tangible Assets  Intangible Asset
 1. They have a physical existence.  1. They don’t have a physical existence.
 2. Tangible assets are depreciated.  2. Intangible assets are amortized.
 3. Are generally much easier to liquidate due  3. Are not that easy to liquidate and sell in the
to their physical presence. market.
 4. The cost can be easily determined or  4. The cost is much harder to determine for
evaluated. Intangible assets.
 5. Examples: vehicle, plant & machinery, etc.  5. Examples: Software, logo, patent, etc.

Amortization Expense: The allocation to expense of the cost of an intangible asset such as a patent or goodwill.

What does amortization mean: In accounting we use the word amortization to mean the systematic allocation of a
balance sheet item to expense (or revenue) on the income statement. Conceptually, amortization is similar
to depreciation and depletion.
Amortization is a term used with mortgage loans. For example, a mortgage lender often provides the borrower with a
loan amortization schedule. This schedule lists each loan payment during the life of the loan, the amount of each
payment that is for interest, the amount of each payment that is for principal, and the principal balance after each loan
payment. The loan amortization schedule allows the borrower to see how the loan balance will be reduced over the life
of the loan.

What is EBITDA-EBITDA is the acronym for earnings before interest, taxes, depreciation and amortization.

What is impairment-The term impairment is usually associated with a long-lived asset that has a market which has
decreased significantly. If the undiscounted future cash flows from the asset (including the sale amount) are less than
the asset's carrying amount, an impairment loss must be reported.
If the impairment loss must be reported, the amount of the impairment loss is measured by subtracting the asset's fair
value from its carrying value.
 UNIT 6 - Intangible and Intangible Assets – INSTRUCTORS REFERENCE
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What is the carrying amount-The term carrying amount is often used in place of book value. The carrying amount refers
to the amounts that the company has on its books for an asset or a liability. For example, the carrying amount of a
company's truck is the cost of the truck minus the accumulated depreciation on the truck.