Glossary
Intangible asset
A valuable resource with no physical form, such as goodwill.
What it means
A non-current asset that lacks physical substance but has value to the business, such as goodwill.
Example
Goodwill paid for when buying a business is recorded as an intangible asset.
Why it matters
It is shown separately from physical assets so readers can see how much value is non-physical.
In practice
Intangible assets are listed under non-current assets in the statement of financial position, above or alongside tangible assets. They have value but no physical form. Goodwill is the usual IGCSE example. It arises when a business is bought for more than the fair value of its identifiable net assets.
If a firm pays RM90,000 for a business whose assets less liabilities are worth RM75,000, the extra RM15,000 is purchased goodwill. It appears as an intangible asset. Its value reflects reputation, a loyal customer base or a good location, none of which can be handled physically.
The key difference from tangible assets is that you cannot touch goodwill. It generally has no independent resale value, because it exists only while the business continues to trade. Do not confuse goodwill with a revenue reserve. Goodwill is an asset on one side of the statement of financial position. A reserve forms part of the capital and reserves that finance the business.
If goodwill and other intangibles feel abstract, one of our teachers can explain them with a simple business-purchase example. Book a trial class.
Related terms
Definitions here are general accounting explanations for study. For your board's exact wording, see its official syllabus via Sources.
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