Intangible Assets And Depreciation Why a Simple Logo Is Worth More Than Your House

The Invisible Billions: Why a Simple Logo Is Worth More Than Your House

Let's talk about some of the activities most of my students do on a daily basis: You scroll through your phone - that little bitten apple logo glowing on the back. You listen to Spotify through your wireless earbuds. Maybe you've got a sausage roll from Greggs in one hand. You wear Nike trainers with that swoosh on the side. Every single one of these things you can touch, right? The phone, the food, the shoes.

But the most valuable thing about all of them is something you absolutely cannot touch. It's not the metal and glass in your iPhone. It's not the pastry and sausage meat. It's not the rubber and fabric of your trainers.

It's the brand. The reputation. The idea. The stuff you can't see, hold, or put on a balance sheet in quite the same way as a delivery van or a factory.

Today we are dealing with intangible assets. And while we're at it, we're going to talk about why that same iPhone that cost you £1,000 last year is probably worth about £600 now.

When A Logo Is Worth More Than A Country's Economy

Apple's brand - just the idea of Apple, not the actual factories or shops or products - is worth over $574 billion in 2025. To put that in perspective, that's more than the entire GDP of Belgium, Austria, or Ireland. The bitten apple logo, the design aesthetic, the perception that Apple products are premium - that intangible asset is worth more than most countries produce in an entire year.

That's not an exaggeration. Brand valuation companies actually calculate this stuff, and Apple has been the world's most valuable brand for years. In 2024, they became the first brand ever to hit the $1 trillion mark in some valuation rankings. Microsoft, Google, and Amazon are all up there too, but Apple keeps winning.

Think about that next time you see someone queuing outside the Apple Store for the latest iPhone when their current one works perfectly fine. They're not just buying a phone - they're buying into an intangible asset worth more than entire nations.

What Are Intangible Assets?

Intangible assets are non-physical things that add value to a business. You can't drop them on your foot, but they can be worth billions. They include:

Goodwill

Goodwill is basically a company's reputation and established networks - the fact that people know who you are and trust you. When a business gets sold, it's often worth way more than just the value of its equipment, buildings, and stock. Why? Because it comes with customers who already know the brand, suppliers who'll give you good deals, staff who know what they're doing.

Imagine you're buying a chippy (Fish and chip shop). One option is a brand new shop with no reputation - you'd have to start from scratch building a customer base. The other option is Bob's Fish & Chips, which has been there for 30 years and everyone in town loves it. Bob's is worth more, even if both shops have identical equipment and buildings. That extra value? That's goodwill.

The problem? You only really know what goodwill is worth when you're actually selling the business. It's not like you can randomly decide "our goodwill is worth £2 million" and stick it on the balance sheet. It only gets valued when money changes hands.

Patents

A patent is legal protection for an invention or process, granted by the government for a specific period (usually 20 years). It gives you the exclusive right to make, use, or sell something, and stops competitors from copying your brilliant idea.

IB Business Management Real-life Examples: Novo Nordisk's patent on Ozempic and Wegovy - those weight-loss drugs everyone's talking about. In 2024, Ozempic alone generated about $19 billion in sales, with Wegovy adding another $9 billion. That's $28 billion a year from one drug (well, the same active ingredient used for two purposes).

Why so much money? Because Novo Nordisk has patents protecting semaglutide (the active ingredient) in most major markets. In the US, those patents don't expire until 2032. In Europe and Japan, 2031. The company has built what's called a "patent thicket" - over 220 different patents protecting various aspects of the drug, from the compound itself to how it's delivered via injection pens.

In Canada, Novo Nordisk forgot to pay a small maintenance fee back in 2019, and their patent there expires in January 2026. One missed payment, and they're losing out on billions. Generic versions will flood the Canadian market, and prices could drop by 25% or more. In China, India, and Brazil, the patents also expire in 2026, potentially opening up markets with billions of people.

This shows why patents are such valuable intangible assets - they're literally the difference between charging premium prices and facing competition from cheap generic versions. The incentive? It cost Novo Nordisk years and billions to develop semaglutide. The patent gives them time to recoup that investment and make a profit before everyone else can copy it.

Copyrights

Copyrights give you legal protection for creative work - books, music, films, software, artwork. If you write a song, you own the copyright. If someone wants to use it, they have to pay you (or get your permission).

Disney is the master of this. Their back catalogue of films - from Snow White (1937) to Frozen to everything Marvel - is protected by copyright. Every time someone streams a Disney film, buys merchandise, or uses a Disney character, the company earns money from those copyrights. That's why Disney fights tooth and nail to extend copyright protection. Mickey Mouse's original copyright was due to expire, but the company has lobbied successfully for extensions multiple times.

On a smaller scale, every time you hear a song on Spotify, the artist (or their record label) is getting paid because of copyright protection. It's why streaming services pay out billions to rights holders every year.

Trademarks

Trademarks protect logos, brand names, and slogans. Think of the Nike swoosh, McDonald's golden arches, the Coca-Cola script font. These are all trademarked, meaning no one else can use them without permission.

Nike's swoosh - literally one of the simplest logos ever designed - is worth billions. The company paid a graphic design student $35 for the original design in 1971. Adjusted for inflation and accounting for the $500 Nike stock the designer received later, she got about $10,000 total.

That swoosh is now worth multiple billions (estimates vary, but Nike's brand value sits around $50 billion in 2025, with the swoosh being a massive part of that). People will pay extra for shoes with that specific tick on them. That's the power of a trademark - it's instant recognition and perceived quality, all from a simple graphic.

Same with Adidas's three stripes, Apple's bitten apple, or Spotify's green circle with the sound waves. These marks are so valuable that companies will sue anyone who comes close to copying them. When you see "knock-off" products trying to use similar logos, there's usually a lawsuit not far behind.

Why is this Relevant for Your IB Business Management Course

Intangible assets are crucial because they represent real value that doesn't appear in the same way as physical assets on a balance sheet. For your exams, you need to understand:

1. Different types of intangibles - goodwill, patents, copyrights, trademarks

2. Why they're valuable - they provide competitive advantage, legal protection, and brand recognition

3. When they appear - goodwill mainly when a business is sold; patents, copyrights, and trademarks when they're registered and actively used

4. Their limitations - hard to value accurately, can expire (patents), need defending (trademarks), can be worthless if the business fails

Wait We Have More for Today: Everything Loses Value

Right, so you understand intangible assets. Now let's talk about the gruelling reality of depreciation - specifically, why your mate who bought a Tesla is probably crying into his overpriced oat milk latte.

What Is Depreciation?

Depreciation is the decline in value of a non-current asset over time. It happens because:

1. Wear and tear - stuff gets used and worn out

2. Obsolescence - newer, better versions come along and make your thing look ancient

Depreciation is NOT actual cash leaving the business. Nothing is physically being paid. But it's recorded as an expense on the profit and loss account because the asset's value is genuinely falling, and that matters for knowing what the business is actually worth.

If you don't account for depreciation, your accounts are basically lying. You're saying "we own a van worth £30,000" when actually, after three years of heavy use, it's only worth £15,000. Investors, lenders, and the taxman all want to know the real value of your assets, not some fantasy number from when you first bought them.

Two Ways To Calculate Depreciation

The IB Business Management examiners want you to know two specific methods: straight-line and units of production.

Straight-Line Method

This is the simple one. You reduce the asset's value by the same amount every single year. Here's the formula:

Annual depreciation = (Purchase cost - Residual value) / Lifespan

Let's say you buy a delivery van for £40,000. You reckon it'll last 8 years, and at the end you can sell it for scrap for £8,000 (that's the residual value or scrap value).

Annual depreciation = (£40,000 - £8,000) / 8 = £4,000 per year

So every year for 8 years, the van's value drops by £4,000. Simple.

Advantage: Dead easy to calculate. You know exactly what the depreciation will be every year.

Disadvantage: It's not very realistic. Most things lose value faster in the early years. Your van depreciates more in year one than year seven, but the straight-line method treats them the same.

Units of Production Method

This is the clever method. It bases depreciation on how much the asset is actually used, not just time passing.

It works in two steps:

Step 1: Calculate the depreciation rate per unit: Depreciation rate = (Cost - Residual value) / Useful life (in units)

Step 2: Calculate actual depreciation: Depreciation = Actual use (in units) × Depreciation rate

Let's use a real example: a taxi or delivery vehicle.

Say you buy a car for a ride-hailing business (think Uber) for £30,000. You expect it to do 150,000 miles total before you sell it for £3,000.

Step 1: Depreciation rate = (£30,000 - £3,000) / 150,000 miles = £0.18 per mile

Step 2: If the car does 25,000 miles in year one: Depreciation in year one = 25,000 × £0.18 = £4,500

If it only does 15,000 miles in year two: Depreciation in year two = 15,000 × £0.18 = £2,700

See how it works? The depreciation matches the actual usage. This makes way more sense for vehicles, machinery, or anything where wear and tear directly relates to how much it's used.

Advantage: More accurate. A taxi doing 50,000 miles a year should depreciate more than one doing 10,000 miles.

Disadvantage: More complicated to track. You need to monitor actual usage (mileage, machine hours, units produced, etc.).

When Each Method Makes Sense

Use straight-line for:

• Buildings (they don't really "wear out" from use, just age)

• Furniture and fixtures

• Software licences (they expire after X years regardless of use)

• Anything where time is more important than usage

Use units of production for:

• Vehicles (base it on mileage)

• Manufacturing machinery (base it on units produced or machine hours)

• Delivery equipment

• Anything where wear and tear directly relates to how much you use it

The Tesla Depreciation Disaster (2024)

In 2024, used Tesla Model 3 and Model Y vehicles lost about 25% of their value - not over several years, but in just one year. Some Tesla Model S owners who paid over $150,000 have watched their cars lose 60% of their value in just a couple of years.

Compare that to a Toyota RAV4, which depreciates about 22% over three years (not one year - three years), and you start to realise you can never be too careful when paying large sums of money for things.

Why is this happening?

1. Tesla keeps slashing prices on new cars - making used ones less attractive

2. Battery concerns - people worry about battery life and replacement costs after warranty

3. Rapid technology changes - your 3-year-old Tesla doesn't have the features of new ones

4. Market saturation - there are loads of Teslas now; they're not special anymore

The Hertz Horror Film:

In 2021, rental company Hertz announced they'd bought 100,000 Teslas for their fleet. Brilliant idea, right? Cutting-edge EVs for their "lucky" customers.

By February 2025, Hertz reported a $2.9 billion loss driven largely by plummeting EV values. They were losing over $530 per car per month. Why?

• They bought Teslas for $40,000+

• Two years later, they were worth under $20,000

• High insurance costs and long repair times made it worse

• Customers weren't even renting them that much

Hertz ended up dumping 30,000 EVs onto the used market at rock-bottom prices, which made the depreciation problem even worse for everyone else who owned a Tesla.

The lesson for you my sear students? Depreciation isn't just a theoretical accounting concept. For Hertz, for Tesla owners, for anyone who bought an EV in 2022-2023, it's real money disappearing from their bank accounts.

Book Value vs Market Value

There are two different values for any asset:

Book value = what it's worth according to your accounts (based on your depreciation calculations)

Market value = what it's actually worth if you sold it today

These can be wildly different. Your accounts might say your 2022 Tesla Model 3 is worth £35,000 (based on straight-line depreciation), but if you try to sell it today, you might only get £25,000. That's a £10,000 difference between book value and market value.

This happens because:

• Markets change faster than depreciation schedules account for

• Depreciation is just an estimate

• External factors (like Elon Musk's politics, new competition, technology changes) affect market value but not book value

For businesses, this matters massively. If your assets are worth less than your books say, your business isn't worth what you think it is. Investors hate surprises like that.

Why Is all This Important?

For your future business:

If you ever start a business, understanding depreciation helps you:

• Budget for replacing equipment before it dies

• Set realistic prices that account for asset depreciation

• Avoid the Hertz situation (buying assets that lose value too quickly)

For investing:

If you're buying shares, look at how companies handle intangible assets and depreciation. Companies that overvalue their assets or ignore depreciation are hiding problems. Companies with strong intangible assets (patents, brands, goodwill) often have competitive advantages. You can never be too careful when assessing possible investment opportunities.

For your career:

Understanding this stuff means you can read a balance sheet and actually know what's going on. Most people can't. That makes you different and valuable.

The IB Business Management Examiner's Corner

For your exams, make sure you can:

On intangible assets:

• Define and give examples of goodwill, patents, copyrights, and trademarks

• Explain why they add value (competitive advantage, legal protection, brand recognition)

• Discuss when goodwill appears on a balance sheet (when a business is sold)

• Explain why patents incentivise R&D (temporary monopoly allows companies to recoup investment)

On depreciation:

• Calculate depreciation using both straight-line and units of production methods

• Explain the advantages and disadvantages of each method

• Discuss which method is more appropriate for different assets

• Explain why depreciation matters even though no cash is spent

• Distinguish between book value and market value

HL only:

• Evaluate which depreciation method is most appropriate given specific business circumstances

• Analyse the impact of different depreciation methods on reported profits

• Assess the implications when book value differs significantly from market value

Quick Exam Calculation Examples

Straight-Line Example

Question: A restaurant buys kitchen equipment for £50,000. It will last 10 years and then be sold for £5,000. Calculate annual depreciation.

Answer: Annual depreciation = (£50,000 - £5,000) / 10 years = £4,500 per year

After 5 years, the book value = £50,000 - (£4,500 × 5) = £27,500

Units of Production Example

Question: A manufacturing machine costs £100,000 and will produce 200,000 units over its life, after which it can be sold for £10,000. In year one, it produces 35,000 units. Calculate year one depreciation.

Answer: Step 1: Depreciation rate = (£100,000 - £10,000) / 200,000 units = £0.45 per unit

Step 2: Year one depreciation = 35,000 units × £0.45 = £15,750

IB Business Management Gold

Intangible assets and depreciation are two sides of the same coin. One tells you about the invisible stuff that makes businesses valuable (brands, patents, reputation). The other tells you about how the stuff you can see loses value over time (vehicles, machinery, equipment).

Both are crucial for understanding what a business is actually worth. Apple's brand is worth hundreds of billions because it's intangible but incredibly valuable. Tesla owners are learning the hard way that depreciation is very real and very expensive.

For your exams, know the definitions, master the calculations, and understand the real-world applications. Examiners love questions about why a company chose one depreciation method over another, or how a patent gives a pharmaceutical company a competitive advantage.

Next time you see that Nike swoosh or Apple logo, remember: that simple design is worth more than most people will earn in several lifetimes. That's the power of intangible assets.

Quick Revision Checklist:

Intangible Assets:

• Goodwill = reputation and networks (only valued when business is sold)

• Patents = exclusive rights to inventions (incentive for R&D, creates USP)

• Copyrights = legal protection for creative works

• Trademarks = protection for logos, brands, and slogans

• All add value but can't be physically touched

Depreciation:

• Decline in value of non-current assets over time

• Caused by wear and tear + obsolescence

• Recorded as expense but NO cash outflow

• Book value = accounts value; Market value = actual selling price

• Straight-line method:

  • Annual depreciation = (Cost - Residual value) / Lifespan

  • Simple but not always accurate

• Units of production method:

  • Depreciation rate = (Cost - Residual value) / Useful life (in units)

  • Depreciation = Actual use × Depreciation rate

  • More accurate for usage-based assets

Stay well,