Intangible Assets

Explanation

The value of intangible assets on the balance sheet can only increase when the assets are purchased from another company. This is to encourage conservatism on the balance sheet.

Intangible assets are assets that do not have physical substance but hold value for a company. They are long-term assets and are recognized on a company's financial statements if they meet certain criteria, such as being identifiable, controlled by the company, and capable of generating future economic benefits.

Let's examine each answer choice to determine the characteristics of intangible assets:

A. They are often non-separable from a company: Intangible assets are often closely associated with the company that owns them. Unlike tangible assets, such as machinery or buildings, intangible assets cannot be physically separated or sold independently from the company. For example, a company's brand name or reputation is tied to the company itself and cannot be sold separately. Therefore, answer choice A accurately describes a characteristic of intangible assets.

B. The value of the assets portrayed in the financial statements tends to increase for companies performing a lot of R&D: Research and Development (R&D) expenses are often associated with the creation or enhancement of intangible assets, such as patents or copyrights. These assets can contribute to the company's future growth and profitability. As R&D efforts lead to the creation or acquisition of intangible assets, the value of these assets may increase over time. Therefore, answer choice B accurately describes a characteristic of intangible assets, contrary to what is stated in the question.

C. They have indefinite benefit periods: Intangible assets can have varying benefit periods. Some intangible assets, like patents, have specific legal protection periods. Other intangible assets, such as brand names or customer relationships, can provide benefits for an indefinite period. Therefore, answer choice C accurately describes a characteristic of intangible assets.

D. They experience large valuation changes based on competitive circumstances: Intangible assets can indeed experience valuation changes based on competitive circumstances. For example, if a company's brand value decreases due to increased competition or negative publicity, the value of its intangible assets, such as the brand name or reputation, may also decline. Therefore, answer choice D accurately describes a characteristic of intangible assets, contrary to what is stated in the question.

In conclusion, based on the provided answer choices, the correct answer should be B. However, it seems that the question and answer choices may contain an error, as both B and D accurately describe characteristics of intangible assets. It is recommended to double-check the source of the question for any potential mistakes.