Intangible asset

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Intangible assets, according to Panasenko et al. (2020), are "identifiable objects of intellectual property recognized according to the civil law, controlled by an organization, and bringing it economic benefits". Thus, in the organizational world, it is possible to verify that the company’s value in the market does not correspond solely to its financial statements, allowing for the conclusion that the value created by companies does not depend only on tangible assets, but also on intangible assets. In this regard, despite the fact that this type of assets does not physically exist, it add a lot of value to companies, allowing it to stand out from its competitors (Seo 2020).

Characteristics of intangible assets

To benefit from of its assets it is essential that companies understand the characteristics of its intangible assets: low marginal cost, high initial investment and economies of scale (Cohen 2005). Regarding the first, companies incur a single production cost and may not incur additional costs at later stages. Moreover, most products require a high initial investment in order to develop the best product to the consumers. Finally, this type of asset entails economies of scale, i.e., as the quantity produced increases, the cost per unit produced decreases.

Identifiable and unidentifiable intangible assets

One of the main characteristics of intangible assets is that it is difficult to identify. However, any company, after analysing the elements that generate value, can distinguish these assets into two groups: identifiable intangible assets and unidentifiable intangible assets (Cohen 2005).

Regarding the first, these are characterised as resulting from legal and contractual processes, with the objective of protecting the company's innovations. Thus, associated to all tangible assets of an organisation, there are always identifiable intangible assets, namely patents, copyrights, trademarks. This type of assets then includes all the intellectual property rights that a company acquires during its operation in the market.

Unidentifiable intangible assets represent all the internal assets of a company that generate goodwill, that is: it is the set of elements that companies obtain during its activities, providing it with a superior worth in relation to their customers and competitors. So, this type of assets is closely related to business development, resulting from the contributions generated by employees' knowledge and experience, by organisational structures and by the relationships established with customers (Daum 2003):

  • Concerning human capital, it is the set of knowledge and skills held by the workers of a company, which are the result of the experiences acquired throughout their professional lives. Therefore, this asset contributes to the creation of value in the company, as it enables the improvement of its production processes. Consequently, the company could distinguish itself from its competitors, as it will possess unique and valuable resources.
  • Regarding structural capital, and according to Peter Drucker (1994): "Only the organization can convert the specialized knowledge of the knowledge worker into performance". Thus, it is fundamental that companies ensure the efficiency and effectiveness of all their activities, develop organisational and computer systems that support the knowledge of their workers, invest, whenever necessary, in Research and Development (R&D) and provide a continuous sharing of knowledge between its departments, to ensure a constant and progressive growth in the market.
  • Finally, customer capital represents the financial result that a company obtains due to the relationships established with its customers. Thus, it is essential that companies promote a direct connection with its consumers, satisfying their needs and contributing to the economic growth of the company.

Intangible assets conclusion

In conclusion, intangible assets have intrinsic characteristics that allow organizations to generate value through its activities and consequently be successful in the long run. So, it is essential that it possess the necessary skills and resources to enhance its intangible assets as well as its economic activity.

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Author: Ana Inês Jorge Gonçalves, Inês Espregueira Guerra Teixeira de Morais, Marta Gomes Ribeiro