intangible resource example

In this article, you will learn what Intangible Assets are, examples of Intangible Assets, types of Intangible Assets, and their Accounting Treatment. Business entities spend resources or undertake liabilities to acquire, maintain, or improve Intangible intangible resource example Assets. They are the source of the CAPABILITIES a firm needs in order to provide its VALUE PROPOSITION. The more of these properties a resource possesses, the more likely it can help competitively differentiate a platform from its rivals.

If your business struggles to create intangible assets, consider how acquisitions, mergers and exchanges can help your business make up for those shortcomings. The value of intangible assets depends on both the cost of creation and the asset’s long-term value. The acquisition and exchange of these assets affect their value, as does the broader market impact of a deal. Amortization of intangible assets entails expensing out their value over their intended lifetime. Much like tangible assets, intangible assets have a useful lifetime, and accountants track the depreciation of an asset’s value throughout that lifetime. Therefore, companies often choose to use CIV since this method attempts to find a value for intangible assets in a way that isn’t linked to market value.

Calculated intangible value

However, these expenses are important because they represent a future financial benefit for the company, as ultimately they add to earnings. Finally, note that positive attitudes, too, can build to levels that trigger switching behavior that you do want. For example, good product reviews by lead customers build up a useful resource that other potential customers notice. If good reviews appear frequently enough, they can enable you to win new customers who would previously have been reluctant.

  • To stay competitive they initiated joint co-operation in R&D, design and procurement, as well as in manufacturing components for cars, trucks and buses (Mason, 1993).
  • Accordingly, expenditure incurred on an intangible asset not satisfying the intangible assets definition and recognition criteria is included in Goodwill.
  • Amortization is the same concept as depreciation, but it’s only used for intangibles.
  • Further, you need to account for such changes so as to reflect them in your accounting estimates.
  • Jointly, Ericsson, Nokia, Panasonic, Motorola, Psion, Samsung Electronics and Siemens set up a collectively owned software licensing company called Symbian.
  • It depends on the strength of your relationships and how much stress you’re willing to introduce into the relationship.

Moreover, the decrease in client acquisition did not seem to have been caused by market conditions; there was still plenty of potential business to be had. Calls to potential clients revealed that the firm had not won this business because of rumors about its poor quality. Since it cannot be amortized, the intangible asset will be carried at cost and then impaired if there is a loss of value (an impairment is a reduction in the book value of an asset).

Tangible Resources

They are actions a company performs in order to create and market value and generate profits. An ACTIVITY is executed by an ACTOR, which can be the firm or one of its partners. Activities relate to owned or partner RESOURCES and they are linked in a VALUE CONFIGURATION (see Table 4.7 and Figure 4.8).

The list of resources in this example is merely illustrative and by no means comprehensive. A valuable resource must also be rare to create a temporary advantage for a platform (i.e., very few rival platforms should possess it). Therefore all four resource properties should have checkmarks in them for a resource to be an enduring source of differentiation. None of the resources in the quick-and-dirty analyses meet those criteria, suggesting that there is no durable source of competitive advantage in the market of these platforms. This is the norm for platform markets with Red Queen competition and the only source of advantage for any platform is evolving faster than rivals. In order to increase social value and overall socioeconomic impact, the management of libraries should be proactive and able to foresee, when possible, the changing social and economic needs of communities.

Strategic decision processes: critical review and future directions

Hence, it is actually a scorecard-type method with the intangible assets being categorized into human capital, information/technology capital, and organizational capital. Intangibles classified under “structural capital” include library systems, databases and the level of IT literacy. Organizational capital includes the library’s management, the existence of flexible service practices, the mobilization of available resources in order to achieve strategic goals, and the general culture of the library. Another important motivation factor for a life analysis study is the estimation of the remaining useful life of the intellectual capital resource.

  • Further examples may include user contracts for item loans, renewals, fees, fines, or licensing fees, and royalties that are included in a contract for a music library, etc.
  • To keep this list focused on the key resources, put it on one side of an index card.
  • If a company creates an intangible asset, the expenses from the process can be written off.
  • Second, the firm had some business that was more trouble than they were worth.
  • The tough decision was made to terminate business from a selection of clients.
  • Thus whether or not a contract or a patent is a tangible or intangible resource is less important than the impact it can have on the firm’s underlying ability to compete in a market.

This is done to know if the conditions exist for these types of intangible assets to have an indefinite useful life. Unlike intangible assets, the value of tangible assets may be 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 by comparing it to the cost of a replacement. A third motivation for partnering is the goal of leveraging a business model and a company’s competencies through partnerships in order to acquire specific resources.