What are intangible assets?

Published Thursday 23 July 2026

Table of contents

• What are intangible assets?
• Identifiable vs unidentifiable intangible assets
• Examples of intangible assets
• Intangible vs tangible assets
• How intangible assets are valued
• Amortisation vs depreciation
• How intangible assets appear on the balance sheet
• Simplify your intangible asset accounting with Xero
• FAQs on intangible assets

Key takeaways

• Intangible assets are non-physical assets that hold long-term value for your business, such as patents, trademarks, copyrights and goodwill.
• They split into identifiable assets you can separate and sell, and unidentifiable assets like goodwill that only arise when you buy another business.
• Intangible assets with a finite useful life are amortised, while tangible fixed assets are depreciated.
• You record intangible assets as non-current assets on the balance sheet, though internally generated ones often aren't recognised.

Your business owns more than the things you can touch. Before you can account for these assets or show them on your books, it helps to understand what counts as intangible and why it matters.

What are intangible assets?

Intangible assets are non-physical assets that hold long-term value for your business, such as patents, trademarks, goodwill and intellectual property. You can't touch them, but they can be worth a great deal.

Unlike stock or equipment, an intangible asset has no physical substance. Its value comes from the rights, relationships or knowledge it represents, and it's expected to benefit your business for more than a year.

Not every intangible asset behaves the same way, so accountants sort them into two groups based on whether you can separate them from the business.

Identifiable vs unidentifiable intangible assets

Identifiable intangible assets can be separated from your business and sold, licensed or transferred on their own. Unidentifiable intangible assets can't be split out this way, and goodwill is the main example.

Identifiable assets include copyrights, trademarks, patents, licences and other intellectual property. You can put a clear value on each one and, in many cases, sell it without selling the whole business.

Goodwill sits in the unidentifiable group because it only exists as part of the business as a whole. It reflects things like reputation and customer loyalty that you can't peel away and sell separately.

It's easier to grasp intangible assets once you see the everyday forms they take. Here are the most common examples you're likely to come across.

Examples of intangible assets

Intangible assets show up in most businesses, even small ones. The list below covers the types you'll meet most often, each with a short description:

• Patents: legal rights that protect an invention or process for a set period
• Trademarks and trade names: protected signs, logos or names that identify your products
• Copyrights: rights that protect original work such as writing, designs or code
• Licences: permissions to use something owned by another party, like software or a franchise
• Software: programs your business owns or has developed for long-term use
• Brand: the reputation and recognition attached to your business name
• Goodwill: the extra value of an acquired business beyond its identifiable assets
• Intellectual property: knowledge-based creations such as designs, formulas and trade secrets

The clearest way to understand intangible assets is to compare them with the physical assets you already know. The difference comes down to whether an asset has physical substance.

Intangible vs tangible assets

Tangible assets are physical things you can touch, while intangible assets are non-physical and hold value through rights, knowledge or reputation. Both appear on your balance sheet, but you account for them in different ways.

Tangible assets include buildings, equipment, vehicles and stock. You can see and handle them, and many lose value through wear and tear over time.

Intangible assets such as patents, trademarks and goodwill have no physical form. To keep track of both, it helps to understand the wider category of fixed assets your business holds for the long term.

Putting a figure on something you can't touch takes a bit more thought than valuing a van or a laptop. A few recognised methods make it manageable.

How intangible assets are valued

You value intangible assets by estimating the economic benefit they bring your business, usually set by the business itself or by independent experts. Valuers commonly use one of three approaches.

The market approach looks at what similar assets have sold for, giving you a value based on real transactions. The income approach estimates the future cash the asset will generate, then works back to a present-day figure.

The cost approach values the asset at what it would cost to recreate or replace it today. Independent valuers often bring these methods together, and software that helps you manage fixed assets keeps the resulting figures organised alongside your other records.

Once an intangible asset is on your books, its cost is usually spread over the years it benefits your business. The method you use depends on whether the asset is tangible or intangible.

Amortisation vs depreciation

Intangible assets with a finite useful life are amortised, while tangible fixed assets are depreciated. Both spread an asset's cost across its useful life, so the difference is mainly the type of asset involved.

Amortisation applies to intangible assets such as patents and licences that run out after a set number of years. You write off a portion of the cost each year until the value reaches zero.

By contrast, depreciation applies to physical assets like machinery and vehicles. Under FRS 102, intangible assets with an indefinite useful life, such as some established brand names, are tested for impairment each year rather than amortised.

Intangible assets have a specific home in your financial statements, and where they sit tells readers how long you expect to hold them. How they got onto your books also affects whether they appear at all.

How intangible assets appear on the balance sheet

Intangible assets are recorded as non-current assets on the balance sheet, meaning you expect to hold them for more than a year. How they're treated depends on whether you acquired them or created them yourself.

Acquired intangible assets, bought from another party, are recognised at their cost. Internally generated ones, such as a brand you built over time, often aren't recognised because their value is hard to measure reliably.

Goodwill arises when you buy another business for more than the value of its identifiable assets, and the way that surplus is split across the assets acquired is known as purchase price allocation. Keeping this treatment accurate is easier when you run financial reports straight from your accounting records.

Tracking intangible assets by hand is fiddly, especially once amortisation and reporting come into play. The right tools keep it accurate without the manual admin.

Simplify your intangible asset accounting with Xero

Xero Accounting Software brings your assets, reports and everyday money work together in one place. You can record fixed assets, track their value over time and pull a clear balance sheet whenever you need one.

With routine tasks automated and your figures always up to date, you get more time to focus on running your business rather than the books, so you can make confident decisions with real numbers behind you. Get one month free.

The questions below come up most often once you start accounting for intangible assets.

FAQs on intangible assets

Here are answers to frequently asked questions about intangible assets.

The main types range from legal rights to reputation-based value your business holds.

What are examples of intangible assets?

Common examples are patents, trademarks, copyrights, licences, software, brand and goodwill. Each holds value without having any physical form.

The split is about physical substance rather than worth.

What is the difference between tangible and intangible assets?

Tangible assets are physical items like buildings, vehicles and stock, whereas intangible assets have no physical form. Both add value, but you account for them differently.

The right term depends on the kind of asset you hold.

Are intangible assets amortised or depreciated?

Intangible assets with a finite useful life are amortised, not depreciated. Depreciation applies to tangible fixed assets such as equipment and vehicles.

Valuation usually calls for a recognised method or an expert view.

How are intangible assets valued?

You can value them using the market, income or cost approach, depending on the asset. The business or an independent valuer usually sets the final figure.

Whether an asset is recognised often depends on how you got it.

Are internally generated intangible assets recognised on the balance sheet?

Often they aren't, because their value can be hard to measure reliably. Acquired intangible assets, by contrast, are recognised at their cost.