Intangible Assets
Definition
Intangible assets are non-physical assets with economic value: patents, trademarks, customer relationships, developed technology, licenses, and brand names. On the balance sheet, most recognized intangibles come from acquisitions, where purchase accounting requires identifying and fair-valuing them separately from goodwill.
Definite-lived intangibles (e.g., customer relationships with an estimated life) are amortized over their useful lives; indefinite-lived intangibles (e.g., certain trademarks) are not amortized but are tested for impairment, like goodwill.
Internally developed intangibles are mostly expensed as incurred under US GAAP (R&D is expensed; limited exceptions exist, such as certain software development costs), which is why asset-light companies with valuable brands can show small balance sheets.
Why interviewers ask
Interviewers test the goodwill-versus-identifiable-intangibles split in purchase accounting and the amortization rules (definite-lived amortized, indefinite-lived and goodwill not). A subtle trap: intangible write-ups in stock deals create deferred tax liabilities because the amortization is not tax-deductible.
Related terms
Interviews don't test definitions — they test recall under pressure.
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