Investments in intangible assets: features, what is profitable and what is an investment in intangible assets.
The source of profitable investments is not only material objects. Intellectual property is aimed at bringing considerable income. Traditionally, this term refers to copyright in a variety of products, patents, trademarks, trademarks, etc. All of them are objects of intangible investments, but the list is much wider.
Investment in intangible assets is an opportunity to turn the exclusive right to use intellectual property into a monetary equivalent.
What are intangible assets?
These investments are always long-term as they contribute to social development and increase the well-being of people. Any intellectual property can be used as a means to acquire surplus earnings as well as as a simultaneous increase in the efficiency of production.
Before finding out the profitability of such an investment, we will determine what applies to intangible investments. These are objects that have an intangible or non-material origin and they are also called non-current assets. Their significance lies in intellectual media. The gain is considered to be the benefit for business, society, the probability of using it as a cultural and historical heritage.
Each type of intellectual property has a certain value
With proper application they can increase the financial capital of the owner. In addition to investing in securities, there are other assets of this kind.
Investments in intangible assets are:
- information (research results, innovative technologies often become promising investments);
- computer programs (the probability to use as an additional area of income);
- trademark, logo, brand name (included in the investment in intangible assets of the company or enterprise);
- ownership of intellectual assets as investment instruments (royalties, franchises, etc.);
- literary works, other artistic texts;
- the detachable part of the reserves(well-trained workers, efficient management techniques, the image in the market);
- personal resources (reputation of each employee, their personal qualities, qualifications);
- right to use the land plot;
- reserves that are separated from the company (these include brands, copyrights, licenses, and contracts).
Music creations, as well as video and audio content, are also investments in intangible assets
Intangible investments are a long-term investment option.
The main features
- property is documented, the right to dispose of it is officially recorded (if we are talking about the results of scientific research, they must meet state standards);
- resources are not planned to be sold (investments for a long time);
- does not apply to material objects;
- professionally classified;
- used as an outlet for solving production problems.
Investments in intangible assets are made for 10-15 years or more. They improve profitability and have a positive effect on the country’s economy.
There are special techniques for accurately estimating the cost of such resources, based on market prices. Calculations help to improve production productivity, accelerate the introduction of new developments.
Any storage media and all circulating resources are not investments in intangible assets. They also do not include any objects that can be given a material form.
Objects whose financial potential is difficult or impossible to calculate do not belong to this category either.
Such assets can exist on tangible media or represent an abstract concept.
Classification of intangible assets
For the financial assessment of profitability, a combination of revenue, cost and comparative methods is taken into account
Advantages and disadvantages of intangible investments
Any profitable investment in intangible assets can be used by several people at once. This is directly the author of intellectual property, as well as investors.
Such sources create favorable conditions for long-term investments and contribute to:
- rapid, sustainable progress of cultural and technical industries;
- financial stimulation of the activities of scientists, research institutions or firms in various fields;
- improving your own business (increasing the price for each unit of product or service, sales volume, if necessary there is a reduction in payments related to loan servicing);
- reducing or completely replacing the state’s participation in the procedure for issuing patents and licenses (the process of acquiring exclusive intellectual property rights is simplified);
- attraction of investors for the purpose of active development of the latest technologies, devices and materials;
- introduction of innovative developments in the field of goods and services;
- growth of the economic potential of the state.
In addition to the undeniable advantages, the use of intangible assets has disadvantages:
- economic risks (you will need a preliminary check of the financial reliability of investments before making capital investments for a long time period);
- sometimes they pay off slowly.
Set of preliminary measures will help reduce possible risks:
- determining the priority industry in which a particular property is likely to be used;
- conducting an assessment of the value of copyrights (royalties, franchises, specific software or a ready-made database);
- the expected income from the practical use of a particular intellectual property is calculated (for example a fee from the sale of a book);
- the expected level of savings for production and further sale of finished products is determined.
Afterwards a costly evaluation technique comes into play. Its essence lies in the preliminary calculation of the market value of an intellectual product. Traditional methods of assessing financial attractiveness are not always reliable when calculating profitability.
Reducing the level of preference
To get stable profitability one require experience working with such resources
The disadvantage of the cost-based method is that, despite its apparent simplicity, it is not objective enough since production costs are not taken into account. To apply this approach or not the investor decides independently in accordance with the chosen strategy.
Intangible assets are a promising way to invest money. Intellectual reserves are an excellent addition to the fixed capital which increases the productivity of the company. In order to properly use such a tool it is important for a potential investor to assess all the advantages, as well as possible risks. It is also worth considering that the basic principles are competitiveness and demand in the market.