In order to check the status of an asset whether it relates to a particular class or not, it is always a good idea that we go for the definitions provided in the relevant pronouncements first as they give the criteria whether a certain asset can be classified in one way or not. In this case, we will have to look for the definition of tangible asset and intangible asset in International Accounting Standards (IASs)
Interestingly, IASs provides no definition regarding Tangible asset, however (surprisingly) intangible asset has been defined. According to IAS 38:
An intangible asset is an identifiable non-monetary asset without physical substance.
This definition describes three main characteristics of an intangible asset which are as follows:
- It must be identifiable i.e. we can distinguish between one asset and the other
- It is a non-monetary asset i.e. other than cash and cash equivalents
- It is without physical substance
Looking at the definition of Intangible asset we can confirm that Cash is NOT an intangible asset as IASs has explicitly excluded it from its definition.
But does it mean that if it is not an intangible asset then it is a tangible asset? To my mind this should not be the justification. Even though many accountants are of the view that as cash has physical substance therefore it is a tangible asset but I disagree as cash does not hold value in itself rather it is just a certificate of the value and if we start taking this certificate as the evidence of tangibility of cash then what do you think about a formula written on the piece of paper. Can we consider formula as tangible now? Of course not.
But we do have a solution to this debate. Even if IASs do not define tangible asset, they have defined another kind of assets called financial asset. IAS 32 defines financial asset in para 11 and if we look at the definition then Cash has been explicitly mentioned in the definition.
In short, cash is neither tangible nor intangible asset. It is a financial asset.
