An intangible asset is an asset that cannot be physically touched but provides economic benefits to a firm. Examples include goodwill, patents, trademarks, and brand recognition. Intangible assets lack physical existence and are not financial instruments. They are recorded at cost if purchased or capitalized with direct development costs if internally created.

1. What is an intangible asset? Consider the characteristics. Provide an example of an intangible
asset. How is it treated in accounting?
Solution
An Intangible assets is an asset which cannot be seen or touched. But it provides econmic
benefits to the firm or company. Example of intangible asset are goodwill, Patent, Trademark.
Brand recognition etc Characterstics Lack of physical existence They are not financial
instruments Accounting Treatment If an intangible asset is purchased then they are recorded at
cost If purchased in exchange of stock, fair value of consideration given or received whichever is
more clear, should be recognised If it is developed then capitalised direct costs incurred in
developing the intangible