how to value intangible assets
a business like coca cola ko can contribute much of its success to brand recognition although brand recognition is not a physical asset that can be seen or touched it can have a meaningful impact on generating sales intangible assets have no recorded book value because of this when a company is purchased the purchase price is above the book value of assets on the balance sheet the purchasing company records the premium paid as an intangible asset on its balance sheet 4there are three common ways that businesses can value their intangible assets according to the american institute of certified public accountants aicpa 5intangible vs tangible assetstangible assets can be current or fixed current assets can be easily used and converted to cash such as inventory fixed assets are tangible assets with a lifespan of one year or more plant property and equipment pp e are considered fixed common tangible assets include property equipment furniture inventory and vehicles financial securities such as stocks and bonds are also considered tangible assets because they derive value from contractual claims 6unlike intangible assets the value of tangible assets is easier to determine the owner may choose to hire an appraiser who determines the fair market value fmv of the asset or they may decide to sell the asset for cash another common form of valuation is comparing it to the cost of a replacement 