What are 'intangible assets'?

Intangible assets are defined as assets that lack physical substance but provide future economic benefits to a company. This includes things like patents, trademarks, copyrights, and goodwill, which can contribute significantly to a company's value but cannot be touched or physically measured. These assets typically represent legal rights or competitive advantages that can generate income over time.

In the context of accounting, intangible assets are recognized on the balance sheet and are usually amortized over their useful lives, reflecting the expense over time. The future economic benefits they provide can manifest through various means, such as exclusive rights to produce a certain product or brand recognition that drives customer loyalty.

Other options such as physical assets that can be touched or the company's cash and cash equivalents do not accurately reflect the nature of intangible assets, as they emphasize tangible or liquid assets instead. Additionally, while intangible assets may have associated expenses over time, they themselves are not depreciated but amortized, which further distinguishes them from tangible assets like machinery or buildings.