What is an Identifiable Asset?

Identifiable Asset

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Identifiable Asset

An identifiable asset is an asset that can be separated from the entity and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract, identifiable asset or liability. These are typically assets acquired by a company that can be attributed a fair value. Identifiable assets can be both intangible and tangible.

An example of a tangible identifiable asset could be a piece of machinery owned by a manufacturing company. This asset can be separated from the company (it could be sold off, for instance) and thus is identifiable.

Intangible identifiable assets could include things like brand names, patents, or customer relationships. For example, if a company were to acquire another company primarily for its strong brand name, that brand name would be considered an identifiable asset. It has value and can be separated from the company (for example, it could potentially be sold or licensed to another company).

It’s important to note that not all assets are identifiable. Some assets, like goodwill, cannot be separated from the company. Goodwill represents the excess value of a company beyond its identifiable assets and liabilities and might stem from things like a strong reputation or high employee morale.

Example of an Identifiable Asset

Let’s consider a practical example of a company acquiring another one:

Suppose TechCorp, a tech company, decides to acquire StartUp, a smaller startup company that has developed an innovative technology and also has a strong brand reputation in the market.

In this acquisition, TechCorp will record the various assets of StartUp that it is acquiring. Among these assets, some of them will be identifiable. For instance:

  • Tangible identifiable assets: These could be the physical assets of StartUp, like its office buildings, machinery, inventory, or computers. Each of these assets could theoretically be sold off separately from StartUp, so they are identifiable.
  • Intangible identifiable assets: These could include StartUp’s proprietary technology (which might be protected by patents), its brand name, and its customer relationships. Despite not having a physical form, these assets are valuable and can be separately sold, licensed, or otherwise monetized. Therefore, they are identifiable.

The value of these identifiable assets will be calculated and recorded on TechCorp’s balance sheet as part of the acquisition process. However, TechCorp is likely to pay more for StartUp than the sum of these identifiable assets, because StartUp has a strong reputation and significant growth potential. This additional amount that TechCorp pays will be recorded as “goodwill,” which is an asset that is not identifiable because it cannot be separated from the company and sold off independently.

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