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Accounting encyclopedia · Financial statements

Intangible assets

An intangible asset is a non-monetary asset with no physical form, such as a patent, trademark, software or goodwill. It is recorded on the balance sheet only when it meets the accounting criteria. The cost is generally spread over time in the financial statements, while tax deductions follow separate Canada Revenue Agency rules.

Sora Accounting & Tax · General information · Editorial policy
Updated · 3 min read

Intangibles cannot be touched, but they can be owned

Tangible assets have a physical form, while intangible assets such as licences, trademarks and goodwill do not, and are usually recorded when purchased.

Visual labels: Tangible: equipment, land; Intangible: licences, brand; Recorded when acquired.

What counts, and what does not appear

BDC lists trademarks, goodwill, patents, software and some internally generated assets, during the development phase, as examples of intangible assets. They are not cash, receivables or investments, and you cannot touch them. They are also different from tangible assets such as land, vehicles and equipment.

Many valuable intangibles never reach your balance sheet. BDC notes that a company’s own brand generally does not appear there, because what went into creating it is recorded as an expense on the income statement. An intangible usually shows up as an asset when you buy it, for example a licence, acquired rights or a business.

Accounting treatment and tax treatment differ

In the financial statements, the cost of an intangible with a limited life is generally spread over the period it benefits you. Others, such as a trademark or goodwill, may last as long as the business, so they are not amortized in the same way and may instead be reassessed for a drop in value. The framework your statements follow decides which approach applies.

For tax, the Canada Revenue Agency uses capital cost allowance classes rather than your accounting schedule. Franchises, concessions and licences for a limited period fall in Class 14, while patents, and licences to use patents, acquired after April 26, 1993 generally fall in Class 44 unless you elect otherwise. Goodwill and certain other intangibles acquired after 2016, such as franchises or licences for an unlimited period, fall in Class 14.1, which has a 5% declining-balance rate. Transitional rules apply to property acquired earlier, so the acquisition date matters.

An illustrative example

Suppose an Ontario design studio pays $12,000 for a five-year licence to use a brand’s artwork. This is illustrative only. The licence has no physical form and benefits the studio over several years, so the cost is generally recorded as an asset and spread across the term. The tax claim is calculated separately under the capital cost allowance rules and may not match the book amount in any given year.

If the same studio instead spent $12,000 building its own logo and website content in-house, the treatment can be different, and some of that cost may simply be expensed. How a cost is classified depends on the facts.

What to discuss with your accountant

Bring invoices, licence agreements, purchase agreements and renewal dates. Ask whether each cost is an expense or an asset, which tax class applies, and whether any part is subject to GST/HST. The CRA excludes Class 14.1 property from the GST/HST definition of capital property.

If you are buying or selling a business, ask how the price is allocated between tangible assets, intangibles and goodwill, because that split can affect both sides. Keep the allocation support with your records.

Sources & editorial notes

Sources checked October 24, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.

Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.