Intangible Assets are best described as items that can’t be seen directly.  This is in contrast to Tangible Assets, specifically noted in business accounting as property, plant, and equipment (PPE).  For accounting purposes under GAAP (Generally Accepted Accounting Principles) Intangible Assets are not incorporated into a company’s financial reporting, specifically its balance sheet with some exceptions as outlined per FASB 141 & 142.  The exceptions primarily fall into purchases and Merger & Acquisition activities.

Current publications state that the overall arm’s length value of companies is comprised of 80% Intangible Assets and 20% tangible assets.  This is an inverse value ratio from 50 years ago, concluding much consideration needs to be placed on Intangible Assets.  The inclusion of Intangible Assets, including intellectual properties, can greatly affect the overall value of a company.  This is even more evident in select industries such as software and technology.  As an example, in software companies, primary efforts are placed on internally developing code, resulting in the majority of assets being derived from Intangible Assets.