Intangible assets

Published Thursday 6 August 2026

Table of contents

• What are intangible assets?
• Examples of intangible assets
• Identifiable vs unidentifiable intangible assets
• Tangible vs intangible assets
• How intangible assets are valued
• Amortisation and impairment of intangible assets
• How intangible assets appear on the balance sheet
• Manage your business assets with Xero
• FAQs on intangible assets
• Related terms
• Learn more about intangible assets

Key takeaways

• Intangible assets are non-physical assets, such as goodwill, patents and trademarks, that add long-term value to your business.
• They fall into two groups: identifiable assets that can be sold or transferred separately, and unidentifiable ones like goodwill that cannot be separated from the business.
• Intangible assets are amortised over their useful life, while indefinite-life assets like goodwill are tested for impairment instead.
• Hong Kong companies record intangible assets as non-current assets under HKAS 38, which aligns with IAS 38.

What are intangible assets?

Intangible assets are non-physical assets that have value to a business, such as intellectual property and goodwill. Unlike equipment or inventory, you cannot touch or see them, but they contribute to your business's worth and future earnings.

Intangible assets are expected to generate economic returns over time. They appear as long-term (non-current) assets on your balance sheet. While tangible assets are depreciated, intangible assets are amortised over their useful life to reflect their gradual consumption.

Examples of intangible assets

Many different types of assets can qualify as intangible. Here are common examples you might encounter in your business:

• Goodwill: the premium paid when acquiring a business above its net asset value
• Patents: exclusive rights to inventions or processes
• Trademarks: protected brand names, logos, and slogans
• Copyrights: legal rights over original creative works
• Licences: permissions to use another party's intellectual property or operate in certain fields
• Brand recognition: the established reputation and awareness your business has built
• Proprietary software: custom applications developed for your business operations

Identifiable vs unidentifiable intangible assets

Intangible assets fall into two groups based on whether they can be separated from the business. Understanding this distinction matters for how you record and manage them.

Identifiable intangible assets can be separated from the business and sold, licensed, or transferred. Examples include patents, trademarks, copyrights, licences, and software. These assets have clear boundaries and can be valued individually.

Unidentifiable intangible assets cannot be separated from the business itself. Goodwill is the main example. It arises from factors like customer relationships, brand reputation, and employee expertise that are tied to the business as a whole rather than existing as standalone items.

Tangible vs intangible assets

Your business likely holds both tangible and intangible assets. The key difference lies in physical form and how each type loses value over time. Tangible assets have physical substance (such as equipment, inventory, and property) and are subject to depreciation.

Here are the main distinctions:

• Tangible assets have physical form; intangible assets do not
• Tangible assets are depreciated; intangible assets are amortised
• Tangible assets are often easier to value using market prices or replacement cost
• Intangible assets may be harder to sell separately, particularly unidentifiable ones like goodwill

How intangible assets are valued

Valuing intangible assets is more complex than valuing tangible ones because there is often no active market to set a price. One common approach calculates the intangible asset value as the difference between the market value of a business and its net tangible assets.

Goodwill often arises during an acquisition. When a buyer pays more than the fair value of the acquired business's net assets, the excess is recorded as goodwill. If you want to value your business, understanding how intangible assets factor in is essential.

Amortisation and impairment of intangible assets

How an intangible asset loses value depends on its useful life. Intangible assets with a finite life (such as patents with a set expiry) are amortised over that period. This spreads the cost across the years the asset provides benefit.

Intangible assets with an indefinite life, like goodwill, are not amortised. Instead, they are tested annually for impairment. If the asset's recoverable value falls below its carrying amount, you write down the value on your financial statements.

How intangible assets appear on the balance sheet

Intangible assets sit under non-current (long-term) assets on your balance sheet. Acquired intangible assets are recorded at their purchase cost. However, internally generated intangibles (such as a brand you build yourself) usually cannot be recognised as assets under accounting standards.

Hong Kong companies account for intangible assets under HKAS 38, which aligns with IAS 38. This standard is issued by the Hong Kong Institute of Certified Public Accountants (HKICPA) and sets out the criteria for recognising, measuring, and disclosing intangible assets.

Manage your business assets with Xero

Keeping accurate records of your assets helps you understand your business's true worth. Xero's accounting software lets you track both tangible and intangible assets, view up-to-date financial reports, and share data with your accountant or bookkeeper.

If you're ready to simplify how you manage your finances, you can get one month free and see how Xero works for your business.

FAQs on intangible assets

Here are answers to common questions about intangible assets.

Are intangible assets current or non-current assets?

Intangible assets are non-current (long-term) assets. They provide value over multiple years rather than being consumed or converted to cash within a single operating cycle.

Are intangible assets fixed assets?

Not usually. Fixed assets normally refer to tangible items like property, plant, and equipment. Intangible assets are also long-term (non-current) assets, but they are recorded separately because they have no physical form.

How do you value intangible assets?

Acquired intangibles are recorded at cost. For internal valuation purposes, you can estimate intangible asset value by subtracting net tangible assets from the total market value of the business.

Is real estate an intangible asset?

No, real estate is a tangible asset because it has physical substance. Land and buildings are recorded under property, plant, and equipment on the balance sheet.

What is the difference between tangible and intangible assets?

Tangible assets have physical form (such as machinery or inventory), while intangible assets do not. Tangible assets are depreciated; intangible assets are amortised. Both appear on your balance sheet alongside current assets like accounts receivable.

Related terms

• Fixed assets
• Current assets
• Net profit

Learn more about intangible assets

• Business net worth
• Trial balance
• Run financial reports