Difference Between Intangible Benefits and Intangible Assets

Intangible Benefits and Intangible Assets

Businesses consist of tangibles like land, buildings, machinery and staff that have a physical presence. They also include intangibles that have value but don’t have a physical presence you can see or feel. But intangibles can transform the way a company operates, how employees are managed, how products and services are developed and sold, and how customers are treated. Intangibles are generally classed as benefits or assets.

Intangible Benefits

Intangible benefits consist of subjective attitudes and perceptions about a company that can’t be expressed in dollar terms on a balance sheet even though they may increase the company’s value as a business. For instance, a new computer information system may produce an intangible benefit of better employee morale that contributes to retention of talent, more innovation, and improved customer satisfaction. But there’s no way to directly translate improved employee morale into revenue even though employee morale will have an effect on revenue.

Influencing Decisions

Although intangible benefits are hard to define, they can influence business decisions. For instance, the Amway Corp. in September 2011 announced a sponsorship deal to be the official nutritional supplement supplier to the Detroit Red Wings professional hockey team, and to have the Amway logo appear on tickets, other paraphernalia and throughout the team’s home arena. Amway said it acted in part to gain the intangible benefits of being associated with a popular sports franchise.

Intangible Assets

Intangible assets consist of information and knowledge that a company can use as “intellectual capital” to produce revenue. Examples include patents, copyrights, brand names, contracts, customer databases, computer software, market exclusivity and special expertise. For instance, a patent on a new arthritis drug can translate into revenue from sales of that drug. A contract giving exclusive distribution rights to a popular product in a major market can translate into revenue from product sales. A copyright on computer software can translate into revenue from leasing or selling the software.

Direct Value

Intangible assets, unlike intangible benefits, can have a dollar value assigned to them for accounting purposes, similar to valuing buildings and equipment. Intangible assets can have a direct dollar value if they are purchased from another entity, such as buying a well-established brand name. Intangible assets with limited useful life, such as with a copyright, can be depreciated over time. Intangible assets also can have indefinite life, such as with a trademark or perpetual franchise.

by ; Herb Kirchhoff