What are 'intangible assets' in financial accounting?

Intangible assets in financial accounting refer to non-physical assets that provide value to a business. Examples include patents, trademarks, copyrights, and goodwill. These assets do not have a physical form like machinery or buildings, but they represent the rights, privileges, or future economic benefits that can contribute to a company's success and profitability.

The correct answer highlights the nature of intangible assets, emphasizing that they are not tangible or physical in nature but still possess significant value in terms of brand recognition, intellectual property rights, and competitive advantages. Understanding intangible assets is crucial for accurately preparing financial statements, as they are often included on the balance sheet and influence a company's overall valuation.