Defining Intangible Assets…

Michael D. Moberly     May 10, 2012

As an intangible asset advocate, one of the more frustrating aspects to the continual campaign of elevating awareness and use of intangibles’ is the rather unhelpful and esoteric language used to formally define them, e.g., they

  • are the non-physical things of value that a company owns.
  • have no set monetary value and no physical measurement.
  • lack physical existence/presence, they can’t be seen or touched.

True, intangible assets can be a source of frustration for company management teams, and, not just the so-called ‘knowledge intensive’ firms.  I think this is primarily because intangible assets do, in fact, (a.)  lack a conventional sense of physicality, and (b.) their performance and value is challenging to objectively measure.

I have encountered countless situations in which management teams, boards, investors, and employees alike, literally struggle, to make sense of what the British often describe as the invisibles. In part that characterization is very understandable because, seldom, if ever, are intangible assets reported on company balance sheets or financial statements. That is, unless they’ve been acquired or ‘lumped together’ as goodwill.

Still, business leaders today would be hard pressed to deny the reality that steadily rising numbers of companies have fewer tangible (physical) assets in their inventory.  Instead, their inventory in most instances has been filled with intangible assets!

Nonetheless, intangible asset strategists routinely say, and I might add, quite correctly so, the development and effective use of intangible assets is absolutely essential to most companies’ near and long term success, i.e., viability, sustainability, and profitability.  To those unfamiliar with intangibles however, or those suspect or dismissive about the assets’ contributory role and value, definitions like those cited above, standing alone, contribute little to achieving the much needed ’ah ah’ moments of, I get it!, that we seek.

Most companies, through their management teams, c-suites, and employees create a substantial number of assets, a majority of which are intangible!  Unfortunately, such creativity exists less in conventional ‘brick and mortar’ dominated firms that remain largely dependent on physical – tangible assets as their key sources for building (company) value and developing sources revenue.

In my view, there are infinite types of intangible assets, many of which are knowledge-based or, more specifically, the intellectual capital held between our ears, stored on our CD’s, issued to our company as intellectual property, or the accumulation of experience and specialized know how when prudently and optimally linked to understanding how and when to use that know how effectively, efficiently, and profitably.

Whether we’re operating a successful business or conducting a scientific project, we tend to seek a comfort zone comprised of facts, numbers, formulas, and ratios, etc.  In other words, the qualitative and quantitative. Under these circumstances, our comfort zone is fairly easy to sustain because the measurement tools we are accustom to using and relying on for decision making and/or analyzing research findings tend to be somewhat tangible wherein a high number or percentage means one thing and a low number or percentage means something different.

But sometimes, that comfort zone of ‘hard numbers’ may be obscure or more fuzzy than we are accustomed, in other words, intangible. In such instances, management teams, boards, and employees alike, are challenged to push our conventional understanding beyond the tangible to the intangible relative to the relationship and contributory value the latter delivers to our companies and organizations.

So, welcome to the specialized, but ever expanding corner of the information age and its outgrowth, the knowledge-based economy, wherein intangible assets now routinely play key roles as contributors – facilitators to most company’s value, sources of revenue, competitive advantages, sustainability, and ‘building blocks’ for growth and future wealth creation.

But, despite the rising importance of intangible assets and the contributions they consistently deliver to companies in all (industry) sectors, they unfortunately remain, for some management teams and boards, challenging to define, recognize, distinguish, and measure.

 (Adapted by Michael D. Moberly from the work of Thomas A Stewart, ‘Trying To Grasp The Intangible’.)


Popular Posts

Divi Real Estate Agent | Luxury Properties


1234 Divi St. #1000, San Francisco, CA 94220

Phone Number

(255) 352-6258

Business Hours

24/ 7 / 365

Sign up to get latest news & Listings:

Do you need some help?

Vivamus eleifend mattis eu faucibus at felis eget. Tincidunt at ut etiam turpis consectetur euismod. Ullamcorper aenean sem sceleris que sed vel facilisi netus ut. Pharetra vitae sed ut sed sit pharetra sed. Sit sollicitudin potenti laoreet auctor non nunc. Quam viverra commodo vel adipiscing tortor ultricies.
Copyright © 2024 | Privacy Policy
Divi – Real Estate Agent