 Intangible assets are long-term assets, which have no physical form, meaning they're not tangible. Usually, they're legal rights. Some intangible assets have finite useful lives, where others have indefinite useful lives. Intangible assets with finite useful lives rarely have residual values, because the legal protections expire at the end of the useful life, rendering them worthless. Two common types of intangible assets with finite lives are patents and copyrights. Patents are legal rights granted by the federal government that grant exclusive rights for 20 years to produce or sell an innovation. Note that the useful life of a patent is often less than 20 years, as technology changes render innovations outdated or obsolete. Copyrights are similar protections, but they cover works of art and software. The legal protection is the author's life plus 70 years. Three common types of intangible assets with indefinite lives are trademarks and trade names, franchises and licenses, and goodwill. Trademarks and trade names protect a distinct slogan or image of a company. Don't start your own company with a slogan, just do it, or Nike will sue you for trade name infringement. Patents and licenses are privileges granted to sell products or services in accordance with specific guidelines. Finally, goodwill is a unique intangible asset. It is the amount paid for a company in excess of the value of its net assets. This video will focus on the accounting for goodwill. So goodwill, again, is a unique intangible asset with an indefinite life, because it can only occur through the acquisition of another company. Goodwill is tested for impairment, like other intangible assets with indefinite lives. However, the test is different and more complicated than the other impairment tests. Usually, goodwill impairment is an intermediate accounting topic, and I will not cover that here. So let's look at an example to learn how to calculate goodwill and how to record it in a journal entry. On January 1, the fine young cannibals acquired all the assets, liabilities, and equity of the English beat for $100,000. The English beats fair value of assets is $95,000, and the fair value of liabilities is $40,000. We only use fair market values when calculating goodwill and recording the purchase of another company. Goodwill is the excess of the purchase price beyond the fair value of the net assets. In this example, the fair value of the assets minus the fair value of the liabilities equals the fair value of the net assets, and that amount is $55,000. Since fine young cannibals paid $100,000 for the company, the excess must be goodwill in the amount of $45,000. The journal entry then is a debit to the newly acquired assets for the fair value of $95,000, a debit to the new intangible asset called goodwill for $45,000, a credit to the acquired liabilities of $40,000, and a credit to cash for the $100,000 paid to purchase the company.