What Are Non-Physical Assets?

 

 

Non-physical or intangible assets provide an economic benefit even though you cannot physically touch them. Another name of this kind of asset is intangible asset that is not physical in nature.
They are an important class of assets. Below is the list of some non-physical assets:

1)    Intellectual property: (e.g., patents or trademarks); most of the time this kind of assets value is determined by its popularity and years of existence. A certain popular patent or trademarks of a product. Whoever copies or used this asset may be brought to court as this kind of asset is not permitted to be distributed otherwise within the company it was registered. 

2)     Proprietary technology: (computer software, etc.), copyrights, patents, licensing agreements, and website domain names. These aren't things that one can touch, exactly, but it is possible to estimate their value to the enterprise. Intangible assets can be bought and sold independently of the business itself.

3)    Contractual obligations : means, in respect of any Person, any Contract of, or relating to, such Person, any outstanding offer or solicitation made by, or to, such Person to enter into any Contract, and any promise or undertaking made by any other Person to such Person, whether or not legally binding.  Any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its Property is bound.

4)    Royalties : A royalty is a legally binding payment made to an individual or company for the ongoing use of their assets, including copyrighted works, franchises, and natural resources. An example of royalties would be payments received by musicians when their original songs are played on the radio or television, used in movies, performed at concerts, bars, and restaurants, or consumed via streaming services. In most cases, royalties are revenue generators specifically designed to compensate the owners of songs or property when they license out their assets for another party's use.
Royalty payments typically constitute a percentage of the gross or net revenues obtained from the use of property. However, they can be negotiated on a case-by-case basis in accordance with the wishes of both parties involved in the transaction.

5)    Goodwill :  is a miscellaneous category for intangible assets that are harder to parse individually or measured directly. Customer loyalty, brand reputation, and other non-quantifiable assets count as goodwill.

Goodwill cannot exist independently of the business, nor can it be sold, purchased, or transferred separately. A company's record of innovation and research and development and the experience of its management team are often included, too. As a result, goodwill has an indefinite useful life, unlike most intangible assets.
Goodwill only shows up on a balance sheet when two companies complete a merger or acquisition. When a company buys another firm, anything it pays above and beyond the net value of the target's identifiable assets becomes goodwill on the balance sheet. Say a soft drink company was sold for $120 million; it had assets worth $100 million and liabilities of $20 million. The sum of $40 million that was paid over and above $80 million (the value of the assets minus the liabilities) is the worth of goodwill and is recorded in the books as such.

6)    Brand equity and reputation:  are also examples of non-physical or intangible assets that can be quite valuable.  Brand equity refers to a value premium that a company generates from a product with a recognizable name when compared to a generic equivalent. Companies can create brand equity for their products by making them memorable, easily recognizable, and superior in quality and reliability. Mass marketing campaigns also help to create brand equity.

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