Definition
Intangible Personal Property consists of non-physical assets that hold value but cannot be seen or touched. Unlike tangible assets like machinery or real estate, these assets are not physical in nature but are still part of a company’s total value. Intangible personal property encompasses a wide range of elements including financial assets and intellectual property.
Examples
- Cash: The most liquid form of intangible personal property.
- Accounts Receivable: Money owed to a company by customers for goods or services delivered.
- Goodwill: The value of a company’s brand name, solid customer base, good customer relations, and any patents or proprietary technology.
- Patents: Exclusive rights granted for an invention, which provide a competitive edge.
- Trademarks: Symbols, names, and slogans used to distinguish products or services.
- Assembled Workforce: The value of a company’s trained and assembled workforce.
- Going Concern Value: The value of an established and operating business as a whole.
Frequently Asked Questions (FAQs)
Q: Is intangible personal property subject to property tax? A: Typically no. In most states, intangible personal property is exempt from ad valorem (property) tax.
Q: How is the value of intangible personal property determined? A: Valuation can be complex and often involves assessing the economic benefits it is expected to provide in the future. Methods like income approach, market approach, or cost approach may be used.
Q: Can intangible personal property be sold separately from the business? A: Yes, many forms of intangible personal property, such as patents or trademarks, can be sold, licensed, or otherwise transferred separately from the business.
Q: What are common legal protections for intangible personal property? A: Intellectual property laws such as patents, trademarks, and copyright protections are common legal frameworks that safeguard intangible personal property.
Q: How are intangible assets reported in financial statements? A: They are typically presented on the balance sheet under non-current (long-term) assets.
Related Terms with Definitions
Tangible Personal Property
Refers to physical assets that can be seen, touched, and quantified, such as machinery, equipment, and inventory.
Ad Valorem Tax
A tax based on the assessed value of an item, such as real estate or personal property.
Copyright
The exclusive legal right, given to an originator or an assignee, to print, publish, perform, film, or record literary, artistic, or musical material, and to authorize others to do the same.
Franchise
A license that a party acquires to allow them to have access to a business’s proprietary knowledge, processes, and trademarks to sell a product or service under the business’s name.
Intellectual Property
A category of property that includes intangible creations of the human intellect, such as inventions, literary and artistic works, symbols, names, and images used in commerce.
Online Resources
- Investopedia on Intangible Assets
- IRS Tangible vs. Intangible Property
- AccountingTools: Intangible Asset
- WIPO: Understanding Intellectual Property
References
- “Intermediate Accounting” by Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
- “Valuation: Measuring and Managing the Value of Companies” by McKinsey & Company Inc., Tim Koller, Marc Goedhart, David Wessels
Suggested Books for Further Studies
- “Intangible Asset Management” by Jeffrey A. Cohen
- “Introduction to Intangible Assets: Measurement and Management” by Christopher B. Hiestand
- “Goodwill and Other Intangible Assets: How Successful Businesses Apply Goodwill Accounting and Acquisitions to Increase Value” by Ervin L. Black, Mark L. Zyla
- “Valuing Intangible Assets” by Robert F. Reilly, Robert P. Schweihs
