Intangible Assets

Abstract

There is general agreement that the intangible assets of enterprises have grown enormously in importance in recent years. This is the culmination of a long-term trend. When double-entry book-keeping was first developed in medieval Italy, the first practitioners of the art were bankers and merchants whose principal assets were cash, business debts, stocks of merchandise and other physical objects, such as buildings and ships. The existing asset categories (monetary assets and tangible assets) served the needs of these early book-keepers very well. Later, during the Industrial Revolution of the eighteenth and nineteenth century, there was a great increase in the magnitude and range of assets owned by enterprises but almost all were in the form of tangible assets, such as the locomotives, carriages, bridges, tunnels and tracks of the first railways and the spinning jennies and automatic looms of the early cotton mills. The existing accounting model served the needs of these enterprises quite adequately. However, gradually over the next two centuries, intangible assets became more significant; assets such as the enterprise’s reputation with its customers, its skilled and experienced workforce, its organizational structure and its store of technical knowledge. The existing accounting model has difficulty in coping with these intangible assets.