Intangible assets
Learn what intangible assets are, see common examples, and how Malaysian businesses record, amortise and value them.
Published Wednesday 30 September 2026
Table of contents
Key takeaways
- Intangible assets are identifiable non-monetary assets without physical substance, such as patents, trademarks, software and goodwill
- Malaysian standards only recognise intangible assets with probable future benefits and reliably measurable cost, so home-grown brands stay off your books
- Finite-life intangibles are amortised, and Malaysia’s private entities standard treats every intangible, goodwill included, as having a finite life
- Goodwill costs aren’t tax deductible in Malaysia, so check how other acquired rights are treated with a tax adviser before you claim
What are intangible assets?
An intangible asset is an identifiable non-monetary asset without physical substance. That’s the definition used in International Accounting Standard (IAS) 38, as summarised on Deloitte’s IAS Plus site.
Put simply, it’s something your business owns but can’t touch, like a trademark, a patent or software you’ve bought. Alongside your physical business assets, intangibles can make up a big part of what your company is worth.
That value matters when you run a small business. A registered trademark or a loyal customer base can help you win work and raise finance. It also counts when you sell the business one day, because a buyer pays for what those assets are expected to earn.
Types of intangible assets
These assets fall into two groups, based on whether you can separate them from the rest of your business. Each one also has a useful life that’s either finite or indefinite, which shapes how you account for it.
Identifiable intangible assets
Identifiable intangibles can be separated from your business and sold, licensed or transferred on their own. Patents, copyrights, trademarks and licences all belong here. They usually come with clear legal rights, which makes them easier to value.
Unidentifiable intangible assets
Unidentifiable intangibles stay tied to the business as a whole. Goodwill is the main example: it reflects the extra value your business has beyond its physical assets, such as your reputation and customer relationships. Picture buying a well-loved bakery in Penang. You’d expect to pay more than its ovens and stock are worth, and that extra amount is goodwill.
Definite and indefinite useful lives
Each of these assets has a useful life, which is the period you expect it to bring economic benefits to your business. A finite (or definite) life has a clear end point, while an indefinite life has no foreseeable limit.
Legal protection often sets that end point. Malaysia’s intellectual property system is run by the Intellectual Property Corporation of Malaysia (MyIPO). Under it, a patent is protected for 20 years from filing, according to the ASEAN intellectual property directory. A trademark registration lasts 10 years and can be renewed every 10 years, so a brand you keep renewing may have an indefinite life.
Examples of intangible assets
Even small businesses own several of these assets, though they’re easy to overlook. Here are common examples you might already have:
- Goodwill: the premium a buyer pays for your reputation and customer relationships
- Patents: exclusive rights to an invention for a set period
- Trademarks and trade names: the names and logos customers recognise you by
- Copyrights: ownership of original work, such as website copy or product designs
- Licences and franchises: rights to use someone else’s brand or business model
- Software: programs you buy or license to run your business
- Customer lists: records of buyers that count as assets when you acquire them from another business
Intangible assets vs tangible assets
The main difference is physical form. Tangible assets are things you can touch, like vehicles and equipment, while intangible assets have no physical substance. Comparing current and fixed assets shows where each type sits in the wider picture.
The two types also lose value differently in your accounts. Tangible assets are written down through depreciation, while finite-life intangibles are amortised. Intangibles are usually harder to value and less liquid too, because there isn’t always a ready market to sell them.
How intangible assets are recognised
Your business can only record an intangible in its accounts when it meets set criteria. In Malaysia, those criteria come from Malaysian Financial Reporting Standard (MFRS) 138 Intangible Assets, issued by the Malaysian Accounting Standards Board (MASB). MFRS 138 is equivalent to IAS 38.
The IAS Plus summary of IAS 38 sets out the main recognition rules, which carry across to MFRS 138:
- An asset is recognised only when future economic benefits are probable and its cost can be measured reliably
- Research costs are expensed as you incur them
- Development costs are capitalised only once technical and commercial feasibility is established
- Internally generated goodwill, brands, mastheads, publishing titles and customer lists are never recognised
Say you’re building an app for your business. The early research goes straight to your expenses, and you can capitalise development costs once the app is technically and commercially feasible. The brand you’ve built over the years stays out of your financial statements, even though it adds real value.
How intangible assets appear on the balance sheet
Once recognised, these assets sit on your balance sheet as non-current assets. That means long-term assets you expect to hold for more than a year, listed with other long-term items and apart from cash and stock.
Under the cost model described on IAS Plus, you carry each asset at its cost less accumulated amortisation and any impairment losses. That carrying amount adds to your total assets, which in turn affects your owner’s equity.
Amortisation and impairment of intangible assets
If an intangible has a finite useful life, you spread its cost across the years you use it. This process, called amortisation in accounting, normally brings the asset’s value down to nil by the end of its life.
Under MFRS 138, intangibles with an indefinite useful life are tested for impairment every year in place of amortisation, according to IAS Plus. Goodwill gets similar treatment under MFRS: goodwill is tested for impairment rather than amortised.
Private entities can choose the Malaysian Private Entities Reporting Standard (MPERS) in place of full MFRS. Under MPERS, every intangible asset, goodwill included, has a finite life and is amortised.
If you can’t reliably estimate that life, the Malaysian Institute of Accountants (MIA) MPERS FAQs cap it at 10 years. MASB has also issued an updated MPERS (2025) for periods beginning on or after 1 January 2027. Check which version covers your year end.
How intangible assets are valued
Valuing intangibles is harder than valuing physical ones, because there’s often no obvious market price. That’s why you or an independent expert usually assesses the value, whether you’re selling the business or working out your business’s net worth.
The Association of International Certified Professional Accountants (AICPA & CIMA) describes three approaches:
- Market approach: compares the asset with prices paid for similar assets
- Income approach: estimates the income the asset is expected to earn in future
- Cost approach: works out what it would cost to recreate the asset from scratch
The right method depends on the asset. A patent that earns steady licence fees suits the income approach, while in-house software may be easier to value by cost.
Tax treatment of intangible assets in Malaysia
According to PwC Worldwide Tax Summaries, the cost of acquiring goodwill and any goodwill amortisation aren’t deductible in Malaysia, because they’re capital in nature. So if you amortise goodwill under MPERS, that expense stays in your accounts without lowering your taxable income.
The tax treatment of other acquired rights, such as patents or trademarks, depends on specific rules and conditions. Check your position with a tax adviser or the Inland Revenue Board of Malaysia (LHDN) before you make a claim.
Keep track of your assets with Xero
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FAQs on intangible assets
Here are quick answers to common questions on this topic.
Are intangible assets current assets?
No, they’re non-current because you hold them for the long term. Current assets, such as stock and receivables, are ones you expect to turn into cash within a year.
Are intangible assets fixed assets?
No, although both are long-term. Fixed assets are physical items like buildings and machinery, while intangibles have their own balance sheet category.
Is intellectual property an intangible asset?
Yes, intellectual property is an identifiable intangible asset because you can own, license or sell it separately. Registering patents and trademarks with MyIPO gives you legal rights that make them easier to transfer.
Is goodwill an intangible asset?
Yes, goodwill is an unidentifiable intangible asset. It usually only appears on your balance sheet after you buy another business, because goodwill you build yourself can’t be recognised.
Is software an intangible asset?
Yes, computer software is a standard example of an intangible asset in IAS Plus’s summary of IAS 38. Software you buy for long-term use is amortised over its useful life, like other finite-life intangibles.
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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.