Q:

What are tangible and intangible assets?

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Quick Answer

Tangible assets are property that has a physical being and can be touched, such as buildings, paper, and equipment, as defined by e-conomic, whereas intangible assets cannot be touched, such as trademarks and patents, as defined by AccountingTools. These two terms are used to categorize any company's assets.

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Full Answer

A company has many different types of assets, but most fall in to one of two categories: tangible and intangible. According to e-conomic, tangible assets are fixed assets that include physical structures, vehicles, inventory, stock and cash. Tangible assets depreciate throughout the course of their life cycle, which means that their worth decreases as the asset is in use. For example, a piece of machinery becomes worn and requires maintenance over time, which lowers its value.

Intangible assets include things such as patents, copyrights, trademarks and Internet domain names. These items do not necessarily depreciate over time. Unlike tangible assets, it can be difficult to place an actual value on items that don't have a physical presence, and liquidating companies rarely include intangible assets as part of the liquidation process. Entrepreneur explains that companies only report on intangible assets if they were purchased by the company, and these assets are usually ignored if they are internally generated. For example, if a company purchases a patent, the sale price of that patent carries over, whereas the research and development costs are expensed immediately because they are internally generated.

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