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Types of intangible assets

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  • Unit 3 - Finance/
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  • Types of intangible assets

Different types of intangible assets (AO2)

Intangible assets are a type of fixed asset except they are non-physical assets with a monetary value to the business. These assets are protected by using intellectual property rights (see Unit 5.8), there are typically four types of intangible assets: goodwill, patents, copyrights and trademarks.

Goodwill is the reputation and established networks (know-how) of an organization, which adds significance above the market value of the firm’s physical assets. It includes the willingness of employees to go above and beyond the call of duty, as they are devoted to the organization. Goodwill can help to entice workers to the organization and to retain them. Goodwill, if included in a firm’s balance sheet, can help to attract investors. However, the value of goodwill is somewhat subjective (as the asset is intangible), so only truly materialises when the business is sold.

Goodwill of employees is an intangible asset

Patents are the official rights given to a business to exploit an invention or process for commercial purposes. They give a registered patent holder the exclusive right to use the innovation for a limited time period. Having a patent creates incentives to invest in research and development; otherwise rivals could simply just copy the innovations. Patents, as an intangible asset, add value to the business, especially as they can gain from having a unique selling point (USP) for the duration of the patent.

Copyrights give the registered owner the legal rights to creative pieces of work. Copyrights cover the work of authors, musicians, conductors, playwrights (scriptwriters) and directors. It give the copyright holder of the intellectual property the exclusive rights to the commercial use of the product. Copyrights enable the owner to prevent competitors from using their published works. The contents of this website is copyrighted to the author and InThinking.

InThinking’s registered trademark is protected by international copyrights

Trademarks are a form of intellectual property, the value of which may be reported on the balance sheet. They give the listed owner the legal and exclusive commercial use of the registered brands, logos, and/or slogans (catchphrases). Each year, Interbrand compiles a list of brand values. The top 10 are listed below.

 Case Study - World's most value brands by brand value (2022)
Statistic: Most valuable brands worldwide in 2022 (in billion U.S. dollars) | Statista
Source: Statista
 ATL Activity (Thinking skills) - Christmas songs and intangible fixed assets

What do you think is the UK’s most popular Christmas song? Challenge your students to name the top ten most played Christmas songs. As with all forms of registered intellectual property rights (IPR), permission must be sought before an original piece of work is used by a third party, whether this is for commercial gain or otherwise. So, radio stations that broadcast Christmas songs during the festive season will usually need to pay royalties to the IPR holder, each and every time the song is played on the radio station.

Read this article from The Independent newspaper to find out the most popular Christmas song in the UK, which earns the band an impressive £1,000,000 ($1,325,000) each year from royalties!

The British rock band Slade released "Merry Christmas Everybody" as a non-album single and the Number 1 hit song earns a whopping £1m ($1.325m) each year from royalties paid by radio broadcasting stations that play the song throughout December during the festive season - essentially, that's the earnings for the band for 1 month's "work". The song was released almost five decades ago back in 1973… a classic example of how copyrighted materials can earn huge amounts of money for the intangible fixed assets of an individual or organization!

According to the article, the top 10 Christmas songs in terms of annual royalties are:

  1. “Merry Xmas Everybody” by Slade £1m ($1.325m) in royalties per year

  2. “Fairytale of New York” by The Pogues and Kirsty MacColl £400,000 ($530,000)

  3. “All I Want for Christmas is You” by Mariah Carey £400,000 ($530,000)

  4. “White Christmas” by Bing Crosby £328,000 ($434,600)

  5. “Last Christmas” by Wham! £300,000 ($397,500)

  6. “Wonderful Christmastime” by Paul McCartney £260,000 ($344,500)

  7. “Stop the Cavalry” by Jona Lewie £120,000 ($159,000)

  8. “2000 Miles” by The Pretenders £102,000 ($135,150)

  9. “Mistletoe and Wine” by Cliff Richard £100,000 ($132,500)

  10. “Stay Another Day” by East 17 £97,000 ($128,525)

Here is Slade's 1973 Music Video for "Merry Xmas Everybody" (1973):

What about in the USA? In the USA, the best-selling Christmas song of all time is Bing Crosby’s White Christmas with worldwide sales of over 50 million copies.

The above article from The Independent newspapers also mentions Mariah Carey in the Top 10. Her hit song "All I want for Christmas is you" (1994) was released 21 years after Slade's hit song but has earned the American artist in excess of $60 million in royalties for her original song. "All I want for Christmas is you" is hugely popularity in Japan, where it’s twice gone platinum (the technical term in the record industry to describe successful single and album sales that exceed 1,000,000 units).

Here is 2019 version of Mariah Carey's "All I want for Christmas is you" music video:

 Brand value - Higher or Lower Quiz

The list below shows 11 well-known brands. Starting with the first clue, decide whether the brand listed in the next row is of higher of lower value. Then go down the table numerically, deciding whether the brand is of higher or lower value than the previously listed one (all figures are in USD).

NumberBrand nameHigher or Lower?
1.Google ($263.4 billion)
2.TikTok

Lower ($59.0 billion)

3.Huawei

Higher ($71.2 billion)

4.Walmart

Higher ($111.9 billion)

5.Alibaba.com

Lower ($22.8 billion)

6.Johnson & Johnson

Lower ($13.4 billion)

7.Delta Air Lines

Lower ($7.3 billion)

8.Deutsche Telekom

Higher ($60.1 billion)

9.Samsung

Higher ($107.3 billion)

10.Amazon

Higher ($350.3 billion)

Source: Brand Directory

How many of these did you manage to get right?

Key terms

  • Copyrights give the registered owner the legal rights to creative works of authors, musicians, conductors, playwrights (scriptwriters) and directors.

  • Goodwill is the reputation and established networks (know-how) of an organization, which adds significance above the market value of the firm’s physical assets.

  • Intangible assets are a type of fixed asset except they are non-physical assets with a monetary value to the business. These assets are protected by intellectual property rights (IPRs).

  • Patents are the official rights given to a business to exploit an invention or process for commercial purposes.

  • Trademarks are a form of intellectual property that give the owner exclusive commercial use of the registered brands, logos, and/or slogans (catchphrases).

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