Which of the following is classified as an intangible asset?

Patents are classified as intangible assets because they represent exclusive rights to a specific invention or innovation, which do not have a physical substance. Unlike tangible assets, such as land, inventory, or buildings, which can be physically touched or measured, intangible assets are non-physical entities that provide future economic benefits.

The value of a patent is derived from the legal protection it affords the inventor, allowing them to control production, use, and sale of the invention for a certain period. This legal status often results in a competitive advantage, which can be crucial in industries that rely heavily on proprietary technology or unique processes.

Intangible assets like patents are recorded on the balance sheet and are typically amortized over their useful life, reflecting their consumption over time. This is in contrast to tangible assets, which are depreciated. Understanding the nature of intangible assets and their implications on financial statements is essential for financial auditing and analysis.