PETALING JAYA: Intangible assets (IAs) is an asset class which are not physical in nature but has a significant value. Examples of IAs are patents, trademarks and brand recognition. This is in contrast to tangible assets which are material assets such as vehicles, land, among others.
To understand further, we’ve asked one of the speakers during the 27th National Real Estate Convention (NREC), Royal Institute of Surveyor Malaysia (RISM) president Datuk Sr. Lau Wai Seang regarding the importance of knowing your intangible assets.
IA’s can further be divided into four different categories:
- Contractual Relationships
The first type of IA’s is that of a legal binding between parties, where contracts govern and provide guidelines to achieve a mutual goal of all parties. As an example of these regarding IA’s, if an employee were to leave a company, the company may need to compensate said person according to the clauses in the contract. This can also be included into the goods and services industry.
- Non-contractual relationship
A non-contractual relationship usually arises from long-term dealing with a particular customer. In this case, it is often heard off that when an emergency engenders, those of which you have this type of relationship with you will more likely go out of their way, even as to not abide by the conditions to help you out. This, in the end, increases the value of the business slightly at the very least.
- Unidentified intangibles
This category consists of tangibles that the sources are undetectable or untraceable, for example, goodwill.
- Intellectual properties (IP)
These assets are the product of creativity of a particular person. It is the most recognised asset as it can be protected by two fields of law; common law and property law. Thus this makes it the most dominant of the four as well. Common IP types is comprised of copyrights, trademarks, patents, confidential information and industrial designs.
However, in commerce IA’s and IP’s are grouped similarly but differently:
- Marketing-related – IA’s that can assist in identifying or selling your business such as trademarks, patents, confidential information, trade secrets, mastheads, domain address, etc.
- Artistic-related – These are things that are related to the filming industry including music rights, broadcast rights, costume rights, industrial rights, etc.
- Technology related – This is the most common among all, patents being the most known type of this division. Others include soft codes, databases, etc.
- Customer-based – Relationships between suppliers and clients fall into this category.
- Contract-based – These are licenses, workforce contracts, franchise contracts, operating and usage rights.
- Government-based – One of the most unheard of, these include SIRIM certifications, Halal certifications and so on. With these certifications, customers immediately feel much safer and thus would prefer products that have been checked and not the latter, increasing sales margin.
What would you reap when you value the IA’s
The truth is that these things create value, which is directly derived from the rights established by the IA’s. These rights then translate into profit generation material when it can be licensed out, sold or even exchanged with another party.
Who commands the value of IA’s?
In Europe or the United States has the professionals whose expertise are in the field of determining the value of an IA and IP rights called business appraisers or business valuers, and in Malaysia, we also have business valuers. For instance, The Royal Institution of Surveyors Malaysia (RISM) too, is a source of reference for IA valuation services, apart from accountants.
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