Disposal of Intangible Assets

Category

Cash Flow

Units

Currency

US-GAAP elements

ProceedsFromSaleOfIntangibleAssets

Reference

ASC 230, Statement of Cash Flows (investing activities); ASC 350

Source

Reported in SEC EDGAR filings (US-GAAP XBRL taxonomy)

Disposal of intangible assets is the cash a company received during a period from selling assets that have no physical form, such as patents, trademarks, licenses, spectrum rights, customer lists, and software, when they are sold on their own rather than as part of a business. It is an inflow in the investing section of the cash flow statement.

Goodwill is excluded, because it cannot be sold separately from the business it belongs to.

The XBRL element ProceedsFromSaleOfIntangibleAssets covers cash received from disposing of intangible assets, excluding goodwill. It is the counterpart of payments to acquire intangible assets. Under ASC 350 and the derecognition guidance that applies to nonfinancial assets, the company removes the asset's carrying amount and records a gain or loss on sale. As with other asset sales, the gain or loss is reversed out of net income in the operating section, while the full proceeds appear here.

For most companies this line is empty or small in most years. It appears most often in industries where rights are actively traded: telecommunications companies sell spectrum, pharmaceutical companies sell rights to marketed drugs or royalty streams, and media companies sell brands or content libraries. Patent portfolio sales by technology companies are another common source. When an intangible is sold together with employees, operations, and other assets that make up a business, the sale is instead reported as a divestiture.

Classification of licensing income deserves care. Selling an intangible outright is an investing inflow, but licensing it to others while keeping ownership produces royalty or license revenue, which is an operating cash flow. Large proceeds from intangible sales are generally one-time events. Analysts treat them as a source of cash for the period, not as recurring cash flow, and look for whether the company gave up future revenue by selling the asset.