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Tangible vs Intangible Assets | Top 3 Differences you Must Know! - YouTube
Channel: WallStreetMojo
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hello everyone hi welcome to the channel
of WallStreetmojo friends today we are
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going to learn tangible vs
intangible assets in our session now
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what exactly is the difference between
tangible and intangible assets first and
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the foremost thing I want you all to
learn exactly what and were exactly this
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things form you have to be familiar with
these terms right so a tangible assets
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okay is something which has a physical
existence and a certain economic value
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and this are physical resources
essential for conducting the business
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operation in a smooth manner you know
they are not basically saleable in
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nature some of the examples for the same
you know I can explain you are like land
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and building we have in the same course
machinery then we have furniture then we
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have vehicles on the other hand if we
talk about the intangible assets they
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are basically those which do not have
any physical existence but poses
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some commercial value and it acts as a
long-term resource for the form so some
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of the instances that includes like
goodwill we have copyright in that we
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have patent for the same and there's one
more example I will take trademark so
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let's understand the difference between
the tangible assets and the intangible
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assets with the help of the info graphics
now the difference over here the
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tangible was his intangible assets what
is the meaning it is owned by the
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organization having monetary value and
physical in existence physical existence
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is very important difference between
tangible and intangible assets which are
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not existing visually here the assets
are visually available with us we can we
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can see the assets here we can't see the
assets but it poses some economic
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life and the value economic life and
value
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there but we can't see and there is no
physical existence there is physical
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existence over here and you can you can
actually see the assets in front of you
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now the valuation valuation of the
tangible assets monetarily possible it
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is difficult to measure in the financial
terms see the valuation of goodwill is
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usually done during the amalgamation
process that is what we call the M&A
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process the mergers and acquisition
process so if any goodwill or what we
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say capital reserve that that comes into
picture in the later skill will be
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recorded in the books of accounts so
this goodwill arises in the case of the
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M&A process otherwise it is really very
difficult to quantify the intangible
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assets what is going to be the exact
value that has to be recorded in that
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particular case but this is monetarily
possible because at what price you have
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purchase let's say your purchases of
machinery for 50 lakh so you'll report
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at 50 lakh if you've got some grant of 2
lakh then you'll report at 48 lakhs but
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you can absolutely monetarily report
tangible assets but that is not possible
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in case of the intangible assets and
there's one more thing I'll write over
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here tangible assets and intangible
assets I'll see that you know the
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tangible assets if you want to really
get into then as for in the India's as
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for the accounting standard of India the
India's previously it was known As 10
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and for the int a intangible asset it is
As 26 that is the accounting standard
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number 26 over here an accounting
standard number 10 right so this are
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both used for the evaluation purpose
over here there are various costs and
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the fair values that have been used and
monetary life has been written is
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determined now collateral acceptance
tangible assets can be accepted as
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collateral and it cannot be accepted as
collateral
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remember one thing like you know see you
want to buy a machinery okay so for
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buying a machinery you or you will take
a loan so for taking a loan let's say
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you have FD that is the fixed deposit
the machinery is costing let's say 50 lakh
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now 50 lakh is the value of the
machinery and the loan that you want to
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take is of 20 lakh
so the bank will allow view the bank
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will see Oh kids find you and let's say
you're FD FD is basically standing at 80
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lakhs so the bank will tell you okay
fine
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put your the amount of the FD as the
collateral and you will get a loan of
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20 lakh but how can you put a
goodwill a trademark on as collateral
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a collateral to obtain a loan not
possible right practical it's not
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possible
so here the things can be put on
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collateral but there's no scenario over
here now the value reduction tangible
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assets over here depreciation is
determined and in intangible assets
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amortization is done both are almost the
same thing it's like you know let's say
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your view botted machinery over here and
let's say goodwill you have which is
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standing at 10 lakh and let's say the
life over here for machinery is 10 years
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and the life over here
remember one thing good any intangible
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assets cannot be valued or cannot have a
life more than 10 years or even if they
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have then you know as for the AS 26 it
says that you know at least or the life
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- at 10 years is acceptable one so
determine the goodwill based on the
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let's say for based on the life so
10,000 per year this is 10 lakhs so 1
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lakh per year and let's say there is a
scrap value over here there is no scrap
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value over there and the the scrap value
let's say is 5 lakh at the end of the
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life so our depreciation over here this
is the depreciation for Goodwill the
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depreciation for machinery is going to
be the life the value of the machinery
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less the scrap value divided by the life
that is as for the SLM method the
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straight-line method so it's going to be
450,000 per year so this is how the
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depreciation is determined for the
tangible assets and amortization for
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intangible assets right so this were the
four differences that one
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needs to study for tangible and
intangible assets now let me run you
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through the key differences between
tangible and intangible tangible assets
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is something that is won
right and by the individual or
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organization utilized for conducting
business activities over a longer period
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of time and on the other hand intangible
assets those which have the economic
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value or a certain life as I told you a
certain life this are considered as
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earned over the hard work executed over
the longer period of time which we which
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we absolutely call as goodwill now the
second the existence of the tangible
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asset is essential for functioning of
the organization but the non-existence
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of the intangible assets will not be a
widespread impact on the form so
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intangible assets offer over here a
cushion you can say that cushion or to
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those associated with the name it has
made for itself in the industry the
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tangible assets can be converted into
cash since it can be viewed to be it can
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be viewed to the eye and can be weighted
in monetary terms right whereas
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intangible assets are difficult to
convert into cash or on on an immediate
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basis okay so I'll just write it so we
hear it cannot be converted tangible
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assets can be destroyed by fire or
accidents or human negligence whereas
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you know the intangible assets you can
say that cannot be destroyed by fire or
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other such disaster but by carelessness
or any such side effects of the business
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decision can affect like you know the
Elon Musk recently made one comment or
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and he actually tweeted on on Twitter
that one comment has costed him 20
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million dollars that was been fine by
the SEC not only that he was also
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removed as a chairman so you can imagine
just one single tweet can affect like
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anything Elon Musk was removed as a
chairman of Tesla he was been charged
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with 20 million dollars as deep
penalized because he wanted to he
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thought of just going for company to
take private and Tesla is a public
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company so you know one comment can
actually destroy everything so that's
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why goodwill is even very sensitive so
on the final thoughts both tangible and
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intangible assets are recorded by the
company in their books of accounts
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tangible assets are highly important for
any organization since it eats
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in the smooth running of the operation
intangible assets helps in creating you
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know few worth of the firm and though
both have the pros and cons they have
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their impact on the functioning of the
organization and it is very important to
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know that determining the tangible
assets of the company offers various
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benefits the usefulness varies greatly
across the industry example I know in
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case of the hospital's medical device
manufacturing the intangible assets are
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you know far more valuable as compared
to the tangible ones on the other side
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industries such as like you know real
estate would would have intangible
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assets but tangible ones will provide
the revenues that they require for the
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operation thank you everyone for joining
the session
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