An identifiable asset has a value that can be quantified and reported on accounting statements. This contrasts with other assets where fair market value may be difficult to determine, for a variety of reasons. Some identifiable assets fall into categories like equipment and real estate, while others are intangible, like copyrights and patents. Though these assets are not physical, it is still possible to determine their fair market value for accounting purposes.
Companies preparing statements for tax purposes, annual reports, and similar documentation need to list their assets and liabilities. These can determine how much a firm owes in taxes and may provide information about its financial position. A statement may declare, for example, that a company owns a set number of patents worth a given amount, or sold copyrights to specific works to earn money over the course of the year. The methodology used in identifiable asset accounting may be discussed to provide context.
Physical assets may be subject to depreciation. This type of identifiable asset can become less functional or useful over time, allowing the company to write off the fair market value. Conversely, an identifiable asset can also appreciate; real estate, for example, may become more valuable. Failing to correctly account for appreciation or depreciation can result in erroneous tax declarations, which may require filing again if tax authorities are not satisfied. Deliberate falsification may be grounds for legal penalties.
In sales, mergers, and transfers, properly valuing assets is important. A company wants to make sure all of its identifiable assets are named, described, and correctly valued in order to be assured of getting a fair sales price if it is selling. It may also be passing on liabilities like outstanding bills to the buyer, in which case these also need to be accurately valued. Firms preparing for mergers may want to distinguish their assets and liabilities for future accounting purposes, like tracking profits brought in by the merger.
An accountant can help a company distinguish between different kinds of assets and correctly describe identifiable assets. Accounting standards and practices provide specific guidelines to help people keep valuations standard and correct. These ensure that any accountant handling financial documentation would arrive at similar numbers, by using the same techniques for valuing and cataloging identifiable assets. If there is a dispute over how to handle an identifiable asset, a company can ask for an auditor's expert opinion to settle the matter.