Details of Intangible Assets in Business (2025 Guide)

What Are Intangible Assets in Business?

Intangible assets are identifiable non-physical resources that contribute to a company’s future earnings.

They are the unseen but powerful components of a business’s worth, the ideas, creativity, relationships, and innovations that drive long-term growth. Unlike physical assets such as equipment or buildings, intangibles represent intellectual property and brand influence.

Under MFRS 138 (Intangible Assets), an intangible asset must be:

• Identifiable (separable or arising from contractual or legal rights),
• Controlled by the business, and
• Expected to bring future economic benefits.

These assets are increasingly important in Malaysia’s digital economy, where software systems, e-commerce data, and trademarks often outweigh factory machinery in overall value.

What Are the Main Types of Intangible Assets?

Most companies own both identifiable and unidentifiable intangible assets that shape their brand and operations.

1. Identifiable Intangible Assets

These can be separated and transferred independently. Examples include:

• Trademarks and brand names
• Patents and copyrights
• Software licences or internally developed systems
• Franchise rights and domain names

For instance, a logistics startup that develops a proprietary routing algorithm owns a valuable intangible asset, the algorithm itself can be patented or licensed.

2. Unidentifiable Intangible Assets

These cannot be separated from the business but still influence its success. Examples include:

• Customer loyalty
• Brand reputation
• Employee expertise

3. Goodwill

Goodwill arises during acquisitions when a company pays more than the fair market value of another’s net assets. It represents future profitability, reputation, and synergy between the two businesses.

How Are Intangible Assets Valued and Recorded?

Proper valuation ensures transparent reporting and prevents overstatement of company value.

Under MFRS 138, intangible assets are initially recognised at cost. After recognition, entities use the cost model, or (in rare cases where an active market exists) a revaluation model. Cost includes purchase price or eligible development costs and directly attributable expenses (such as legal, registration, testing).

Once recognised, finite-life intangibles are amortised over their actual useful life. Indefinite-life intangibles (some trademarks) are not amortised and are tested for impairment annually under MFRS 136. Goodwill is recognised under MFRS 3 and also tested annually under MFRS 136.

To value intangible assets, businesses may use:

• Cost approach: Based on creation or acquisition cost.
• Market approach: Benchmarked against similar transactions.
• Income approach: Based on expected future income streams.

This valuation is not just an accounting formality, it affects everything from investor confidence to loan eligibility.

Why Are Intangible Assets Important for Business Growth?

Intangible assets drive innovation, competitiveness, and brand equity in today’s market.

They are the foundation of differentiation, what makes one business stand out from another offering similar products.

Competitive Advantage:

A strong brand or patented technology provides barriers to entry that physical assets cannot match.

Investor Appeal:

Investors often assess intangible value (like intellectual property and brand potential) before deciding on equity funding.

Revenue Growth:

Digitally driven businesses rely heavily on intangibles such as software and content rights to scale operations.

“In 2025, intangible assets define a company’s market perception more than its physical size,” notes a senior partner from a Malaysian accounting firm.

How Are Intangible Assets Treated for Tax and Compliance?

Tax treatment depends on classification, amortisation policy, and recognition standards under Malaysian law.

Intangible assets are governed by MFRS 138 and MPERS Section 18 (for private entities). They must meet specific recognition conditions before they can be recorded or amortised.

• Useful life:  Finite-life intangibles are amortised over their actual useful lives (no prescribed range). Some intangibles may have indefinite lives (no amortisation).
• Goodwill: Not amortised, but tested annually for impairment.
• Research vs. Development: Research costs are expensed immediately, while development costs may be capitalised if future benefits are probable.

LHDN Considerations:

Not all intangible assets qualify for tax deductions. Expenses on internally generated goodwill or branding may not be claimable. However, costs related to intellectual property registration, licensing, or acquisition may qualify as capital allowances.

Always refer to current LHDN guidelines or consult a licensed tax agent to ensure compliance with Malaysia’s tax regulations on intangible assets.

What Are Common Mistakes Businesses Make with Intangible Assets?

Many companies overlook or mismanage intangible assets due to misunderstanding or poor documentation.

Here are the most frequent errors:

1. Failing to record internally developed software as an intangible asset.
2. Overvaluing goodwill post-acquisition without conducting impairment testing.
3. Ignoring annual reviews of asset values, which can lead to misstated profits.
4. Lack of documentation, especially for IP ownership, licensing, or development costs.

Tip: Maintain clear contracts, development logs, and valuation reports. These records are essential for audits and potential business sales.

How Do You Account for Amortisation and Impairment?

Amortisation spreads the cost of intangible assets across their useful life, while impairment reflects loss in value.

Amortisation Example:

A RM100,000 software licence with a useful life of 5 years would be amortised at RM20,000 annually.

Impairment Testing:

If the software becomes obsolete due to new technology, its recoverable value may drop, prompting an impairment loss entry.

Regular amortisation and impairment ensure your financial statements reflect the real economic value of your business assets.

How Do Intangible Assets Affect Business Valuation?

Intangible assets play a central role in how your business is valued by investors and buyers.

During mergers or acquisitions, valuers assess these assets to determine goodwill and acquisition premiums. A strong intangible portfolio, patents, brand presence, and customer loyalty, often commands a higher valuation multiple.

Businesses that record and manage intangible assets properly tend to secure better financing, insurance coverage, and acquisition offers.

Conclusion: Why Understanding Intangible Assets Matters in 2025

Intangible assets are no longer “hidden” resources, they define the modern business landscape. From intellectual property to digital branding, these elements shape financial performance, investor trust, and long-term resilience.

Recognising and managing them correctly helps businesses unlock real value, ensure compliance, and stay ahead in a knowledge-based economy.

If you want to strengthen your digital presence, grow brand equity, or appear in trusted media outlets, PRESS Digital PR Agency can help you develop, protect, and amplify your intangible value through strategic visibility campaigns.