The intangible assets are assets under which are under the ownership of a company that is not tangible, ie can not be physically perceived. They are considered as assets since they generate an economic return to said company. Also, being part of the market value of the company, they are taken into account in its accounting.
Characteristics of Intangible Assets
The main characteristics of Intangible Assets are the following:
- They do not have a physical image.
- They are non-material assets 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 to supply products or administrative purposes.
- It is extremely complicated to assign a value in the accounting of the company for being intangible.
Types of Intangible Assets
The intangible assets can be classified into identity, incorporation, sale, legal life and the ability to recognize for accounting purposes.
- Not identifiable
- Created by the organization
- No commercial
Term or legal life
- Not identifiable
How can intangible assets help the company?
Given the variety of intangible assets and the changes they may go through, there are many ways in which intangible assets can help the company improve.
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 transfer of rights of use over intangible assets
Another way to access the intangible assets that companies use are those from copyright, patents, or their use is allowed to third parties in exchange for receiving some type of financial compensation.
The reduction in the tax base of the Income Tax
According to article 23 of the Corporate Tax Law, the tax base of that income from certain intangible assets can be reduced. The value of this reduction will be calculated through a percentage of the income of these assets.
The percentage is the result of the multiplication of 60% by the coefficient that comes out of the division of expenses resulting from the beginning of the asset. This same number will be multiplied by 30%, but not 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 the economic activity.
- That company that receives the rights to use the intangible assets, 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 will generate tax expenses that are deductible.
- The company that receives the rights to use intangibles is not in a tax haven unless it is in a member territory of the EU (European Union) or there are valid economic reasons.
- Yes, the assignment of use is as a whole and there are ancillary benefits, in the contract it must be clearly reflected how much corresponds to the accessory benefits and the part of the price corresponding to the assignment of use of intangibles.
- The necessary accounting records must be available to determine the direct income and expenses corresponding to the assets subject to the assignment.
- The income subject to reduction will be calculated regardless of whether the intangible asset is calculated or not due to the difference between the income of the year before transferring the right to use or exploit the assets and the amounts that are deducted from taxes for the consumption of the intangible assets, and for the year’s expenses directly related to the designated asset.
The sale of intangible assets
Apart from the transfer of the use of intangible assets, the company can obtain income from the sale of intangible assets. This is possible if the final control of said assets is transmitted. It is of the highest importance for companies that engage in research or creative activity.
There are other cases, and the sale of intangibles serves as a way to obtain enough cash to reduce the financial leverage of the company, this when necessary.
The advantageous position, they can generate in operations between companies
In some operations between companies, such as the acquisition of companies, the takeover of a company, the negotiations as a whole, the elaboration of long-term collaboration contracts between two or more companies and many others, the valuation of intangibles can be A determining element.
The valuation of intangible assets in the acquisition of companies represents a decisive action to determine the cost of the acquisition.
In long-term collaboration agreements between companies, this is also greatly influenced by intangibles. An example of this is franchising. 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 get a brand value that positions the company within their market. It is the main reason that makes the investment in intangibles of a company, such as training, patents, and marketing strategies, among others, allow a greater advantage among its 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 highlight that without an intangible resource involved, the tangible asset cannot increase its value.