Intangible assets
Find out what intangible assets are, with examples and how they're recorded, valued and amortized.
Published Thursday 23 July 2026
Table of contents
Key takeaways
- Intangible assets are things your business owns that hold value but have no physical form, such as patents, trademarks, copyrights and goodwill.
- They split into identifiable assets you can sell or separate, and unidentifiable assets like goodwill that you can't.
- Tangible assets are depreciated, while intangible assets are amortized over their useful life or tested for impairment.
- Intangible assets sit as long-term assets on your balance sheet, and usually only the ones you buy are recorded there.
What are intangible assets?
Intangible assets are non-monetary assets that have no physical substance but still hold value for your business. They're often forms of intellectual property, such as patents and trademarks, along with goodwill.
You can't touch an intangible asset the way you can a vehicle or a building, yet it can be one of the most valuable things your business owns. A strong brand, a loyal customer base or a registered patent can all give you an edge that's hard for competitors to copy.
Types of intangible assets
Intangible assets fall into two groups, based on whether you can separate them from the business and sell them on their own.
Identifiable intangible assets can be separated from your business and sold, licensed or transferred. Common examples include:
- patents
- trademarks and trade names
- copyrights
- licences
Unidentifiable intangible assets can't be separated from the business and sold on their own. The most common example is goodwill, which reflects the extra value of a business beyond its identifiable assets, such as its reputation and customer loyalty.
Examples of intangible assets
Intangible assets show up across almost every business, from the software you run to the reputation you've built. Common examples include:
- patents
- trademarks and trade names
- copyrights
- licences
- software
- goodwill
- brand recognition
- customer relationships
Tangible vs intangible assets
The main difference between tangible and intangible assets comes down to physical form, and it changes how you account for each one.
Tangible assets are physical items you can touch, such as equipment, vehicles, inventory and other fixed assets. Intangible assets have no physical substance, so their value sits in the rights or advantages they give your business.
The way you spread their cost over time also differs. Tangible assets are depreciated, while intangible assets are amortized.
How intangible assets are recorded and valued
Intangible assets are recorded as long-term, or non-current, assets on your balance sheet. They're usually recorded at cost, meaning what you paid to acquire them.
Generally, only acquired intangible assets appear on the balance sheet. Internally developed ones, such as a brand you've built up over time, usually don't, because their value is hard to measure reliably. Under international standards, an intangible asset is defined as an identifiable non-monetary asset without physical substance.
Goodwill works a little differently. It typically arises when you buy another business for more than the fair value of its identifiable assets, and Canadian small businesses generally follow ASPE guidance on goodwill and acquired intangibles to record it.
Amortization vs impairment
How you account for an intangible asset over time depends on whether its useful life is finite or indefinite.
Intangible assets with a finite useful life, such as a patent with a set expiry, are amortized over that life. This spreads their cost across the years they help your business.
Intangible assets with an indefinite useful life, such as goodwill, aren't amortized. Instead, they're tested for impairment, which checks whether their value has dropped below what's recorded. This is separate from how you treat short-term items like current assets.
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FAQs on intangible assets
Here are answers to some frequently asked questions about intangible assets.
What is the difference between tangible and intangible assets?
Tangible assets are physical items you can touch, such as equipment or inventory. Intangible assets have no physical form but still hold value, such as patents, trademarks and goodwill.
Are intangible assets amortized or depreciated?
Intangible assets are amortized, while tangible assets are depreciated. Intangible assets with an indefinite useful life aren't amortized and are tested for impairment instead.
Do intangible assets appear on the balance sheet?
Acquired intangible assets appear on the balance sheet as long-term assets, usually at cost. Internally developed intangibles, like a brand you've built yourself, generally don't.
What is an example of an intangible asset?
A patent is a common example of an intangible asset. Others include trademarks, copyrights, licences, software and goodwill.
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.