What is intangible assets, Accounting Basics

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Q. What is Intangible Assets?

Intangible assets consist of the nonmonetary, noncurrent, nonphysical assets of a business. Companies should charge the costs of intangible assets to expense over the period benefited. Among the intangible assets are rights approved by governmental bodies such as patents and copyrights. Other intangible assets include and goodwill leaseholds.

A patent is a right granted by the federal government it provides the owner of an invention the authority to manufacture a product or to use a process for a specified time.

A copyright granted by the federal government provides the owner the exclusive privilege of publishing written material for a specified time.
Leaseholds are rights to use rented properties habitually for several years.

Goodwill is an intangible value attached to a business evidenced by the capability to earn larger net income per dollar of investment than that earned by competitors in the same industry. The capability to produce superior profits is a valuable resource of a business. Usually companies record goodwill only at the time of purchase and then only at the price paid for it. The Home Depot has written off as its goodwill "cost in excess of the fair value of net assets acquired".


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