Here is a detailed elaboration of all the intangible assets a business must learn about.
A trademark is that intangible asset that legally restricts other companies from using your logos, business models and brand name. It involves a single that distinguishes the good and services from that of other companies. Moreover, a trademark can also secure your intellectual property.
Any original work created by the professional whether a painting, content, scientific development or invention falls under the hood of intellectual property. There are certain guidelines or set of rules to get them legally secured to prevent others from using it with their name or for their good.
There are many benefits of getting a trademark:
- Those who want to protect their branding gets a legal security by acquiring a trademark
- The accounting purposes of an online trademark value is equal to its cost
- Even though trademark do not get amortized but even it happens they get impaired
The image above shows the three kinds of trademarks that are used for different categories of businesses. It helps in making a customer recognize your business as an authentic entity. You imprint your business in the customer’s mind and make them stay connected to your company.
By having a trademark, you tend to make a positive relationship with your target audience and gain credibility in the search engine. It’s a part of the visual representation a business has- logo or website. Every region has their own law enforcement agencies. Companies established in the US go for having a U.S Patent.
A trademark is of incredible value for a business especially when the industries are getting too crowded. You need to secure your business and its every asset. Even though a trademark does not take up space in the company’s financial report, but its advantages are undeniable. For instance, if you go for selling your product line, the trademark on your products will uplift the market value.
Getting a trademark is comparatively affordable than designing a logo. You have to pay a minimal amount and your trademark will be ready to use.
Trademark’s Annual Review
Sometimes when the value of an intangible property decreases the overall profit of that business plummets as well. However, trademark is amortized. It means that even though trademark is an intangible asset its value never decreases. It is believed to have an indefinite life which ensures that it sustains its value forever. Thereby never creating a negative value impact on the business as well.
However, to keep things working progressively a business need to recheck the value of its trademark after every couple of months. In case, if a company finds out that the value of its trademark is lesser than it was before, it means that the trademark is impaired. On the account of impairment, the value of the trademark is decreased to the competitive value. You can even record the value gap of your trademark in the financial record of the business.
The legal permit to publish a work of authorship involves copyrights. it is an amortizable asset that helps you secure your content from getting copied and misused. The use of copyrights has increased a lot as people have found out new ways to scam. Books writers and publishers have made it compulsory to get a copyright certificate before proceeding to publishing the content.
The key takeaways involved in copyrights include:
- The work of authorship includes computer software, novels, poetry, songs, lyrics, movies, scripts, plays and architectural drawings
- An author gets the property security for his entire lifetime and last for 70 years after his demise
- The value of the copyrights is the amount that the author paid to get the copyrights from the original owner
- To calculate the value of your copyrights you have to amortize the present value of your copyright with that of original value divided by the current market value. It will help you get the estimated revenue it generated.
By getting copyrights for your work of authorship you tend to protect your asset from getting illegally copied. Whatever you write is considered as your intellectual property and those who intrude will be treated according to the laws.
· Value of the Copyright
The value of your copyrights is the total amount you paid to get it which includes the fees of the copyright forms you filled and the charges of the professional you hire for legal guidance.
· Amortizing the Copyrights
Copyrights are amortized its value decreases every year and the loss is added in the company’s financial sheet. As the copyrights are eventually terminated it gets amortized. The amortization is calculated by calculating the revenue generated till the time business expected it to produce outcomes.
When you patent an invention you get the legal permits to sell or manufacture it. Three basic kinds of patents are followed:
- A Utility Patent- In this type, the legal permits are given for the articles, machines and process you created.
- A Design Patent– It revolves around the things you have designed that may include the logo design or the ornament designs you have created.
- A Plant Patent- The permission given to those who have invented a plant.
This is how a patent looks like:
Patent is an intangible asset and last for 30 years according to the U.S patent laws.
The value calculation is same as that of copyrights. It is calculated based on the amount the company has to any to get its patent. Cost involved in the entire process is recorded on the company’s financial sheet.
For instance, a company patent its product with a lifetime of 15 years for a million dollar. The invention will produce revenues for only 10 years and for the remaining decade the owner has to decrease its asset’s value by 100,000. Moreover, to balance the books, the business owner has to manage the financial sheet by entering an amortization expense of $100,000 for the upcoming ten years.