Intangible Assets
Identifiable non-physical assets such as software, patents, licences and trademarks that are expected to generate future benefits.
Formula
Carrying Value = Cost - Accumulated Amortisation - Accumulated Impairment
Unit
₹ crore
In depth
Accounting recognises an intangible only when it is identifiable and was either purchased or meets strict development criteria, which creates a large asymmetry: acquired brands appear on the balance sheet while internally built ones do not. That is why a consumer company with an enormously valuable brand may show almost no intangibles, and why book value understates such businesses systematically. Research spending must be expensed while qualifying development spending may be capitalised, and where a company draws that line materially affects reported profit. Aggressive capitalisation of development costs is a recognised warning sign, because it converts an expense into an asset.
Worked example
Two identical companies own a brand worth ₹400 crore. The one that bought it carries ₹400 crore of intangibles and amortises them; the one that built it carries nothing and expensed the advertising. Their book values differ by ₹400 crore for no economic reason.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Intangible Assets” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.