What Are Intangible Assets?

This article also answers the following questions:

  • What types of assets does a company have?
  • What is the relative worth of intellectual assets to a company?

What Types of Assets Does A Company Have?

It is useful to think of the value of an enterprise as being split into physical assets, financial assets and intellectual assets. Physical assets are those which have a physical presence (i.e. are tangible), for example buildings, real estate, vehicles and equipment.  Financial assets are those which derive a financial value for their owner (bonds, shares, savings) and are typically classed as intangible (i.e. do not have a physical manifestation).  Intellectual assets are identified as intangible effects that the company can lay claim to, for example a brand, skill sets, reputation, goodwill, processes, customer databases or trade secrets.

Hierarchical diagram of the world of intangible assets.

What is the Relative Worth of Intellectual Assets to a Company?

Increasingly, intellectual assets represent a large proportion of value for their owners, and can often greatly exceed the company’s physical assets value.  Obvious examples are hugely successful internet websites, compared to more traditional tangible products-based businesses.  The pie charts below show the financial assets for The Coca-Cola Company compared to the financial assets for Google.  Acknowledging, protecting and building upon the intellectual assets of a company adds significantly to understanding the strengths and value of the organisation by capitalising on its expertise and exploiting innovations.

Financial data for The Coca Cola Company (Figures from 31 December 2009 Financial Report) and Google (Figures from April 2011 Financial Report).  Figures quoted are in millions.