The Expert Podcast

So this question comes to us from Alex in Maryland working on a case with some research of corporate records and the question is are intangible assets included on a financial statement and intangible assets is a little bit of a gray area but typically they're going to include things like copyrights trademarks patents things that are not physically tangible of vehicles real estate equipment something that you can see touch hold or use so these intangible assets many times in the technology era are worth as much or more than many traditional assets like bank accounts or real estate so finding these assets sometimes goes beyond a typical asset search.

For example if you look at a balance sheet of a company the balance sheet is going to have on that document the assets held by the entity by the corporation if they own real estate it'll be on a balance sheet if they own bank accounts cash it'll be on the balance sheet if they own equipment it'll be on the balance sheet now if those assets are encumbered by debt financing uccs then that negative entry will show up on the debit side or the liability side of the balance sheet.

What about intangible assets what if you hold a patent what if you have a trademark intangible assets which have been depreciated or that have been capitalized by an exchange of some other asset like cash usually will show up on a balance sheet um that intangible asset sometimes the largest intangible asset for a company is goodwill where if you have a brand name if you have built up client base that will show up as goodwill or maybe even called blue sky in some transactions.

The way that's determined is to first look at that balance sheet to see if there's a reflection of that if there are other possible hypothetical valuable resources held by that corporation just because they're not documented or itemized on a balance sheet does not mean they don't exist one of the largest valuable assets that can be used by creditor is technology domain names websites databases those typically will not show up as a um scheduled item on a balance sheet so it takes a little bit of digging you want to find out from corporate records are there references to the number of clients that exist sometimes you can extrapolate it by how many employees a company has how many clients per employee what the revenue is divide that by their average transaction price.

These intangible assets many times are tried to be slipped under the radar when it comes to claims of liability claims of debt judgments certainly they're hyped up when it comes to financing so if somebody's trying to borrow money or convey the value of their company to a third party they're going to talk about these other valuable parts of the company asset class so that's another way to look for these types of valuable resources if there has been any recent financing applications or even granting of capital there may be references to these valuable company holdings in those documents for example credit application might show that you know we have the goodwill value of a company might be a million dollars because we have these customers in this revenue stream and you know these um projected future sales.

And that doesn't mean that it's not real it's not an inflated value look if you have a company that you know has let's say 500 000 a month in revenue and it comes from an income stream of recurring clients repeat clients subscriptions that revenue stream itself is an asset now technically it could turn off overnight but that revenue stream is often used by lenders to put a value on capitalization so as a creditor or doing an investigation you can also identify that intangible asset.

Other often overlooked intangible assets are phone numbers if a company has a phone number they've been using for a long time and it's identified with that company they normally don't want to lose the number so including that in your itemization your scheduling of assets that you want to check into it's a good idea to look at all those things because many times a company is willing to negotiate a settlement or to work with a creditor when they know the creditors looking at all the nooks and crannies.

We had a case last year where the email address of the top sales person was technically defined as a corporate asset and when we found that email that's where all the sales leads went into all the customers knew that email everybody's using an email the the court decided to grant that asset to the creditor so rather than losing all that potential sales inquiry activity the company decided to negotiate a settlement and uh clear up the debt.

So intangible assets intellectual property those kind of things may not seem like they're valuable to you as a creditor but it's very important not to overlook those when you're doing asset searching because they can come in handy and if nothing else they can lead you to other potential tangible assets sometimes an email will lead you to other bank accounts sometimes a website domain name will lead you to real estate so you want to make sure you search everything.

So they may not show up on a balance sheet they're certainly going to show up on internal documents for value we had a client that was selling a a chain of businesses in a regional area and the sales price included the assets the uh real estate the equipment all of the fixtures and there was an additional amount added on to it for what was called blue sky or goodwill and that was a legitimate amount because that business had a cash flow so don't overlook intangible assets don't overlook intellectual property because it may help you with recovering debt or even valuing a company put your comments below messages below to let you know let us know what you think and what questions might be good for future videos.Retry