Intangible Assets (What it is, Characteristics and Configurations)

The intangible assets They are goods under the possession of a company that are not tangible, that is, they cannot be physically perceived. They are considered as assets since they generate an economic return for said company. Likewise, as they are part of the market value of the company, they are taken into account in its accounting.

Characteristics of Intangible Assets

The main characteristics of a intangible asset are as follows:

• They do not have a physical image.
• They are non-material goods of the company, such as benefits, competitive advantages, rights, aspects that increase the value of income.
• These assets have a progressive payment method for the time in force
• Intangible assets are usually used for product supply or administrative purposes
• It is extremely difficult to assign a value to them in the accounting of the company because they are intangible.

Types of Intangible Assets

The intangible assets They can be classified into: own identity, incorporation, sale, its legal life and the possibility of accounting for it.

Of identity

• Identifiable
• Not identifiable

Incorporation

• Acquired
• Created by the organization

Form of sale

• Commercial
• No comercial

Term or legal life

• Limited
• Life

Accountingly identifiable

• Identifiable
• Not identifiable

How can intangible assets help the company?

Given the variety of intangible assets and the vicissitudes they can go through, there are many ways in which intangible assets can help improve the company.

Improving your ability to increase sales

Through intangible assets, new markets can be found in order to have more demand, on the other hand, they serve to increase production with intangible assets.

Reducing production costs

If intangible assets are produced and managed correctly, especially in the growth stage of a company, production costs can be reduced.

The assignment of rights of use over intangible assets

Another way of accessing the intangible assets used by companies are those from copyrights, patents, or their use is allowed to third parties in exchange for receiving some kind of remuneration monetary.

The reduction in the tax base of the Corporate Income Tax

As established in article 23 of the Corporation Tax Law, the tax base of income derived from certain intangible assets can be reduced. The value of this reduction will be calculated through a percentage of the income from said assets.

The percentage is the result of the multiplication of 60% by the coefficient that comes out of the division of the expenses resulting from the birth of the asset. This same number will be multiplied by 30%, but without exceeding 100%. However, not all intangible assets generate this right to reduction.

To achieve this reduction, assets must comply with the following:

• The person who receives the rights to use intangible assets must do so during the development of an economic activity.
• That company that receives the rights to use the intangible asset, and this is linked, the intangible assets may not be used in the production of goods or services obtained by the transferor company and this generates tax expenses that are deductibles.
• The company that receives the rights to use intangibles is not located in a tax haven, unless that it is in a member territory of the EU (European Union) or there are economic reasons valid.
• Yes, the transfer of use is jointly and there are ancillary benefits, the contract must be clearly reflected how much corresponds to ancillary services and the part of the price corresponding to the transfer of use of intangibles.
• You must have the necessary accounting records that allow you to determine the direct income and expenses that correspond to the assets assigned.
• The reduced income will be calculated regardless of whether or not the intangible asset is accounted for by the difference between the income of the year prior to the transfer of the right to use or exploit the assets and the amounts that are tax deducted for the amortization of the intangible asset, and for the expenses of the year directly related to the asset transferred.

The sale of intangible assets

Apart from the transfer of use of intangible assets, the company can earn income from the sale of intangible assets. This is possible if definitive control of said assets is transferred. It is of utmost importance for companies engaged in research or creative activity.

There are other cases, and it is that the sale of intangibles serves as a way to obtain sufficient cash to reduce the financial leverage of the company, this when necessary.

The advantageous position that they can generate in transactions between companies

In some business-to-business transactions, such as the acquisition of companies, the takeover of a company, joint negotiations, the elaboration of long-term collaboration contracts between two or more companies and many others, the valuation of intangibles can be an element determinant.

The valuation of intangible assets in the acquisition of companies represents a decisive action to set the cost of the acquisition.

In long-term collaboration agreements between companies, this is also strongly influenced by intangibles. An example of this are franchises. The franchisor provides a variety of services, also delivers some goods, but the transfer of certain intangibles is the most important element.

Importance of Intangible Assets

Intangible assets are essential in any company. With them, they achieve a brand value that positions the company within its market. It is the main reason that investment in intangibles of a company, such as training, patents and marketing strategies, among others, allow a greater advantage among their competitors.

Thanks to this, companies are able to generate a greater number of sales, as well as expand their client portfolio. It is important to note that without an intangible resource involved, the tangible asset will not be able to increase its value.