Companies involved in producing goods have tangible assets, including the automobile and steel industries. The factory equipment, computers, and buildings would all be tangible assets. Technology companies that are involved in producing smartphones, computers, and other electronic devices use tangible assets to produce their goods. Companies within the oil and gas industry also own a large number of fixed assets that are tangible.
For example, companies that drill oil own oil rigs and drilling equipment. Oil producers are extremely capital intensive companies, meaning they require significant amounts of capital or money to finance the purchase of their tangible assets. Intangible assets are typically nonphysical assets used over the long-term.
Intangible assets are often intellectual assets, and as a result, it's difficult to assign a value to them because of the uncertainty of future benefits. Intangible assets are intellectual property that include:. Depending on the type of business, intangible assets may include internet domain names, performance events, licensing agreements , service contracts, computer software, blueprints, manuscripts, joint ventures , medical records, permits, and trade secrets.
Intangible assets add to a company's possible future worth and can be much more valuable than its tangible assets. A brand is an identifying symbol, logo, or name that companies use to distinguish their product from competitors.
Brand equity is considered to be an intangible asset because the value of a brand is not a physical asset and is ultimately determined by consumers' perception of the brand.
A brand's equity contributes to the overall valuation of the company's assets as a whole. Positive brand equity occurs when favorable associations exist with a given product or company that contributes to a brand's equity, which is achieved when consumers are willing to pay more for a product with a recognizable brand name than they would pay for a generic version. The Sensodyne brand has positive equity that translates to a value premium for the manufacturer. Negative brand equity occurs when consumers are not willing to pay extra for a brand name version of a product.
For example, producers of commodity products, such as milk and eggs, may experience negative brand equity because many consumers are not concerned with the specific brands of the milk and eggs they purchase. Since brand equity is an intangible asset, as is a company's intellectual property and goodwill , it cannot be easily accounted for on a company's financial statements. However, a recognizable brand name can still create significant value for a company.
Investing in the quality of the product and a creative marketing plan can have a positive impact on the brand's equity and the company's overall viability. Several industries have companies with a high proportion of intangible assets. They include the following:.
Technology companies, particularly within the area of computer companies, copyrights, patents, critical employees, and research and development, are key intangible assets. Apple Inc. AAPL would typically have intangible assets.
Entertainment and media companies have intangible assets such as publishing rights and essential talent personnel. Intangible assets in the music industry, for example, involve the copyrights to all of a musical artist's songs. Musicians and singers can also have brand recognition associated with them. The music production company might own the rights to the songs, which means that whenever a song is played or sold, revenue is earned.
Although these assets have no physical properties, they provide a future financial benefit for the music company and the musical artist. Consumer products and services companies have intangibles like patents of formulas and recipes, along with brand name recognition, are essential intangible assets in highly competitive markets.
Forgot Password? Article by Harsh Katara. Difference Between Tangible and Intangible The primary difference between tangible and intangible is that tangible is something which a person can see, feel or touch and thus they have the physical existence, whereas, the intangible is something which a person cannot see, feel or touch and thus do not have any of the physical existence.
What are Tangibles? Please select the batch. Cookies help us provide, protect and improve our products and services. By using our website, you agree to our use of cookies Privacy Policy. Assets that have a physical existence and that can be touched and can be felt are known as Tangible Assets. Tangible Assets have monetary value, and the same is materially present. Intangible Assets Intangible Assets Intangible Assets are the identifiable assets which do not have a physical existence, i.
They are considered as long-term or long-living assets as the Company utilizes them for over a year. Intangible Assets are amortized Intangible Assets Are Amortized Amortization of Intangible Assets refers to the method by which the cost of the company's various intangible assets such as trademarks, goodwill, and patents is expensed over a specific time period.
Though a customer may buy a product whose generic tangibility like the computer or the steam plant is as palpable as primeval rock—and though that customer may have agreed after great study and extensive negotiation to a cost that runs into millions of dollars—the process of getting it built on time, installed, and then running smoothly involves an awful lot more than the generic tangible product itself.
If a shampoo is not used as prescribed, or a pizza not heated as intended, the results can be terrible. Packaging is one common tool. Pickles get put into reassuring see-through glass jars, cookies into cellophane-windowed boxes, canned goods get strong appetite-appealing pictures on the labels, architects make elaborately enticing renderings, and proposals to NASA get packaged in binders that match the craftsmanship of Tyrolean leatherworkers.
The significance of all this for marketing can be profound. Satisfaction in consumption or use can seldom be quite the same as earlier in trial or promise. Some promises promise more than others, depending on product features, design, degree of tangibility, type of promotion, price, and differences in what customers hope to accomplish with what they buy.
Of some products less is expected than what is actually or symbolically promised. The right kind of eye shadow properly applied may promise to transform a woman into an irresistible tigress in the night. Not even the most eager buyer literally believes the metaphor. Yet the metaphor helps make the sale. Neither do you really expect the proposed new corporate headquarters, so artfully rendered by the winning architect, automatically to produce all those cheerfully productive employees lounging with casual elegance at lunch in the verdant courtyard.
But the metaphor helps win the assignment. Metaphors and similes become surrogates for the tangibility that cannot be provided or experienced in advance. Not even tangible products are exempt from the necessity of using symbol and metaphor. A computer terminal has to look right. It has to be packaged to convey an impression of reliable modernity—based on the assumption that prospective buyers will translate appearance into confidence about performance.
Common sense tells us, and research confirms, that people use appearances to make judgments about realities. Everybody always depends to some extent on both appearances and external impressions.
Nor do impressions affect only the generic product itself—that is, the technical offering, such as the speed, versatility, and precision of the lathe; the color and creaminess of the lipstick; or the appearance and dimensions of the lobster thermidor. Consider, for example, investment banking. So, too, with tangible products. The reason is easy to see.
In both investment banking and big boilers, becoming the designated vendor requires successful passage through several consecutive gates, or stages, in the sales process. It is not unlike courtship. But unlike a real marriage, investment banking and installed boiler systems allow no room for divorce. Once the deal is made, marriage and gestation have simultaneously begun. After that, things are often irreversible. Investment banking may require months of close work with the client organization before the underwriting can be launched—that is, before the baby is born.
And the construction of an electric power plant takes years, through sickness and in health. As with babies, birth of any kind presents new problems.
Babies have to be coddled to see them through early life. Illness or relapse has to be conscientiously avoided or quickly corrected. Similarly, stocks or bonds should not go quickly to deep discounts. The boiler should not suddenly malfunction after several weeks or months. If it does, it should be rapidly restored to full use. Understandably, the prospective customer will, in courtship, note every nuance carefully, judging always what kind of a husband and father the eager groom is likely to make.
The way the product is packaged how the promise is presented in brochure, letter, design appearance , how it is personally presented, and by whom—all these become central to the product itself because they are elements of what the customer finally decides to buy or reject.
Certain conditions must be satisfied before the prospect buys. If they are not satisfied, there is no sale. In each case, the promised product—the whole product—would have been unsatisfactory. Sign In Now. Sign In For the sake of quality, our forum is currently "Restricted" to invitation-only.
Remember Me! Don't have account, Sign Up Here. Forgot Password. You must login to ask question. Javascript is disabled. Question 1. Answer 1. Right Great! Wrong Assets which have a physical existence are called tangible assets. Question 2. Answer 2. Correct Great! Wrong Intangible assets are amortised. Question 3.
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