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