Question

Chapter 5 of your textbook describes intangible assets as having no physical substance and usually having a higher degree of uncertainty about their future benefits. Intangible assets include patents, copyrights, franchises, goodwill, trademarks, trade names, and secret processes.

Lululemon Athletica Inc’s most important asset is not their store fixtures, it is their brand image. However, if you look at Lululemon’s 2016 financial statements, the brand name is not listed as a key part of its $27 million in recorded intangible assets. The company’s financial statements list goodwill, non-competition agreements, and reacquired franchise rights as its three most significant intangible assets.

Similar in nature, some people argue that Coca-Cola’s major asset is its secret formula for making Coke. An argument can be made that Bell Canada’s most important asset is its subscriber base.

Identifying and measuring these intangibles is often difficult, and as a result many intangibles have not been captured on the company’s statements of financial position.

In your initial post, think of other examples and address whether these companies recognize these intangible assets on their financial statements. Why or why not? Converse with peers about their examples, and reflect on the role intangible assets have in companies.

Answer 1

There are various other companies also whose major assets is some intangible asset . However due to various factors they are not being recognized in financial statements. Some of those companies are :-

1. Amazon = Amazon has a great supplier distribution channel. It has connections and contracts with a large number of dealers which allow Amazon to sell a wide variety of products to a large number of customers. However, since we cannot value those supply chain or the distribution channel , hence, it is not recorded in the financial statements of the company.

2. Facebook = Facebook has very unique artificial intelligence technology ans a very talented pool of employee with it which serves as the biggest asset of the company. However, since, we can't value employees or human resource of a company, hence , they are not shown in financial assets as asset of the company.

3 . Domino's = Domino's pizza crust is considered to be the best among the pizza line which serves as a major selling factor for it. It has a technique of preparing those pizza crust, however, again such technology or methodology cannot be valued, hence , it is not shown as an asset in it's financial statements.

Role of intangible assets in companies

It should be noted that intangible assets plays a very important role in building a brand image of a company. Often we have seen that intangible assets of the company helps in creating USP for the company and that USP helps the company in creating wide range of customer base. Those intangible may be in the form of any technology , methodology , human resource , knowledge base etc. Now there has been a shift from material (tangible asset) based industries or businesses towards knowledge base (intangible asset ) industry or businesses. Hence, there should be no doubt that intangible asset of the Company plays a very important role in the success of a company.