SME intangible assets

This report investigates the nature of SME intangible assets and the ways in which they are developed, protected and transferred, and, finally, identifies valuation methodologies.

ACCA research report 93

Dr Chris Martin
Chris Martin & Associates

Julie Hartley
Oxford Brookes University

Intangible assets are knowledge-based assets that contribute to individual SMEs’ uniqueness and provide sources of competitive advantage. SMEs are heterogeneous and issues involving intangible assets depend on the nature of each SME’s activities, size and stage of development. Some SMEs are built entirely around their intangible assets, whereas in others intangible assets primarily complement physical and financial assets. The issues involved in developing and exploiting intangible assets differ from those involved in managing physical and financial assets. The lack of concrete form and the general absence of functioning markets for intangible assets make their valuation problematic in comparison with physical assets that are regularly bought and sold in transparent markets.

This report investigates first the nature of SME intangible assets and the ways in which they are developed and protected. Then at the issues surrounding the transferability and valuation of individual intangible assets are identified. Next, the way in which intangible assets relate to earnings in different business models and influence whole enterprise values is considered. Finally, conclusions are drawn and the implications for SME accountants and business advisers are identified.