Information
Information Making the intangible, tangible
banner1 Intangibles

Value

This sounds like a simple question – what is value?  Value is a single representation of the future benefits, of an object, to the owner.  An object has value when it is ‘of worth’ to someone, which means it has utility and related benefits.  Utility is the satisfaction that an owner has when using an object.  If the objects’ utility is also desired by someone else then the object becomes an asset and there is a demand for the object and its inherent utility.  The value of any given asset is therefore directly related to the budget of all possible and potential owners that presently exist or may exist in the future i.e. the market.

Intangibles

If you can’t physically touch it, mentally understand it or precisely measure it then it’s intangible. An intangible asset is an intangible object that has utility and a market for it.  It must also be identifiable and separable from other assets.

An intangible asset must be owned or of worth to someone and until the intangible object is codified (made explicit or tangible) it cannot be owned by someone other than the original creator. In this tacit state, the ‘tacit intangible elements’ that make up the intangibles' utility can only be owned by an individual person – the original creator. Once the tacit intangible elements are codified then the intangible object can be owned by someone other than the originator such as a firm – it may at this point transition from an intangible object to an intangible asset.

Here's a very simple definition of an intangible asset in a business context:

‘All the components of a firm that are codified and exist separately from monetary and tangible assets’

Intellectual Property

Intellectual Property and their associated economic rights are widely understood and there are some excellent texts and information sources such as WIPO that can explain the various categories such as Patents, Trademarks, Copyrights and Designs etcetera.

More importantly, Intellectual Property is a sub-category of intangible assets.  There are several classes of intangibles that are less well described such as:

  1. Rights – usually codified in a firms contracts
  2. Undefined intangibles
    • Goodwill
    • Relationships
    • Going concern value
  3. Intellectual Property
  4. Structural capital – assets owned by a firm that support employees to create, codify and commercialise their tacit knowledge