Intangible Assets

Intangible assets are the non-physical assets on a balance sheet: patents, trademarks, licenses, customer relationships, acquired software, and goodwill. They mostly arrive through acquisitions — accounting rules force an acquirer to value what it bought, while the same assets built in-house (a brand, a codebase) usually never appear on the books at all.

That asymmetry is why the line needs care. Internally developed R&D is expensed as incurred, so a company's most valuable property can be entirely invisible on the balance sheet while a serial acquirer shows billions in intangibles for similar assets. Book value comparisons between the two are close to meaningless without adjustment.

Definite-lived intangibles amortize over their useful lives; goodwill and indefinite-lived intangibles face impairment tests instead. Value investors often strip all of it out and work from tangible book.