Tangible Assets vs. Intangible Assets on Balance Sheet
Valuation methods may include income, market, and cost approaches, each with its assumptions and complexities. In accounting, goodwill is an intangible value attached to a company resulting mainly from the company’s management skill or know-how and a favorable reputation with customers. A company’s value may be greater than the total of the fair market value of its tangible and identifiable intangible assets. This greater value means that the company generates an above-average income on each dollar invested in the business. Thus, proof of a company’s goodwill is its ability to generate superior earnings or income. Intangible assets can provide long-lasting benefits to a company, but conventional accounting practices do not measure them as creating a long-lived capital asset.
