<p>All assets which have a finite useful life are depreciated. For example, your patents or copyright might hold for 5 or 10 years but no more. Thus, it is quite coherent to reflect the loss of value through depreciation and amortization. Same goes for a software for example: in 5 years time, a software might be obsolete, so we need to reflect this in the financial statements.</p>

<p>However, the intangible assets which do not have a finite useful life (e.g. goodwill) will not be depreciated, though its value can be impaired. A great example was provided <a href="http://www.bloomberg.com/news/articles/2015-07-22/microsoft-drops-as-nokia-charge-leads-to-largest-quarterly-loss">last summer by Microsoft</a>.</p>

<p>The way it is done is the very same as for tangible assets.</p>

<p>Under IFRS, the relevant IAS is the <a href="http://www.ifrs.org/IFRSs/IFRS-technical-summaries/Documents/IAS38-English.pdf">IAS 38</a></p>

CC BY-SA 3.0
2015-12-30T12:08:06.103Z
2015-12-30T12:08:06.103Z
Hector
<p>Companies intangible assets are something which is not physical e.g. Patents, copyrights etc.
How can we depreciate companies intangible assets and why it is done?</p>

CC BY-SA 3.0
2015-12-30T05:24:28.363Z
What is the difference between amortization and depreciating intangible asset?
Rudra
CC BY-SA 3.0
2015-12-30T06:48:50.757Z
I'm voting to close this question as off-topic because it's about accounting principles, not economic principles. This could be migrated to [money.se]
410 gone
CC BY-SA 3.0
2015-12-30T14:29:40.053Z
We should hash this out in economics-meta. There are numerous journal of economic literature (JEL) codes concerning accounting and accounting is often a class taught within the economics and business schools so while @EnergyNumber's position has some merit it isn't the only valid position.
BKay
CC BY-SA 3.0
2015-12-30T18:31:53.460Z
cc @Bkay Currently, Accounting is treated as off-topic in economics.se, http://economics.stackexchange.com/help/on-topic. _But_ "Business Economics" are "on topic but". It is my impression, that a question like this one falls somewhere in between.
Alecos Papadopoulos
CC BY-SA 3.0
2015-12-31T12:09:03.973Z
Is this really an accounting question? Or is it on how to calibrate the depreciation rate $\delta$, given that intangible assets are more and more part of production?
FooBar
CC BY-SA 3.0
2015-12-31T12:09:21.830Z
Nevermind, now I saw the tags.
FooBar
<corporate-finance><accounting>
Depreciating companies intangible assets
Rudra
# Depreciating companies intangible assets

(Asked by: username_0 on 2015-12-30)

Companies intangible assets are something which is not physical e.g. Patents, copyrights etc.
How can we depreciate companies intangible assets and why it is done?

**Tags:** corporate-finance, accounting
> **Comments:**
> **username_0**: What is the difference between amortization and depreciating intangible asset?  
> **username_1**: I'm voting to close this question as off-topic because it's about accounting principles, not economic principles. This could be migrated to [money.se]  
> **username_2**: We should hash this out in economics-meta. There are numerous journal of economic literature (JEL) codes concerning accounting and accounting is often a class taught within the economics and business schools so while @EnergyNumber's position has some merit it isn't the only valid position.  
> **username_3**: cc @Bkay Currently, Accounting is treated as off-topic in economics.se, http://economics.stackexchange.com/help/on-topic. _But_ "Business Economics" are "on topic but". It is my impression, that a question like this one falls somewhere in between.  
> **username_4**: Is this really an accounting question? Or is it on how to calibrate the depreciation rate $\delta$, given that intangible assets are more and more part of production?  
> **username_4**: Nevermind, now I saw the tags.  

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## 1 answers

### Answer by username_5 on 2015-12-30. Score: 4 | Accepted answer

All assets which have a finite useful life are depreciated. For example, your patents or copyright might hold for 5 or 10 years but no more. Thus, it is quite coherent to reflect the loss of value through depreciation and amortization. Same goes for a software for example: in 5 years time, a software might be obsolete, so we need to reflect this in the financial statements.

However, the intangible assets which do not have a finite useful life (e.g. goodwill) will not be depreciated, though its value can be impaired. A great example was provided [last summer by Microsoft](http://www.bloomberg.com/news/articles/2015-07-22/microsoft-drops-as-nokia-charge-leads-to-largest-quarterly-loss).

The way it is done is the very same as for tangible assets.

Under IFRS, the relevant IAS is the [IAS 38](http://www.ifrs.org/IFRSs/IFRS-technical-summaries/Documents/IAS38-English.pdf)


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