I am not a econmics student.I dont understand anything about money ,investement and trying to learn about it

I learned financially successful people invest more in building asset than liablity.. I understand about asset as much as wikipedia explains (Nothing fancy)..

In financial accounting, an asset is any resource owned by the business. Anything tangible or intangible that can be owned or controlled to produce value and that is held by a company to produce positive economic value is an asset. Simply stated, assets represent value of ownership that can be converted into cash (although cash itself is also considered an asset)

So I was thinking about people who once developed an program or software.people liked it and they turned it into something big..Gave that program a shape into large industry.. like spotify,facebook,tiktok,pubg mobile..COD

So can we classify facebook as zukerberg's asset because he owns it,controls and produce value.Can A software,game,program that one developed be counted as an asset if one owns,controls and produce value with that?Can I count such programs as potent as assets like house or lands or (whatever asset financially rich people have..)

If one developes an application,published on steam for even 2 bucks and people are liking that(gaining popularity..) will that count as his asset? even it is sold for 2 bucks but gaining popularity by serving people.knowing that the code is gaining popularity,further working and expanding ,

will it dipict that the person is "investing his time , energy and resource in building an asset or potential asset?"

Even if its not an asset then what it could be..Though The are big industry generation large value for the person who developed itself and others to..

  • Facebook is a company with shares. Zuckerberg's assets include a lot of those shares, but not all of Facebook shares. There are other shareholders. Therefore, you need to distinguish between the assets of Facebook and the assets of Zuckerberg personally. But yes, Facebook has many software assets.
    – MSalters
    Apr 5 '20 at 10:46
  • What are you trying to answer? Yes it is an asset - but so what? Are you just trying to justify that building your app was worthwhile and not a waste of time?
    – D Stanley
    Apr 6 '20 at 14:29
  • @DStanley If you are investing your time ,energy ,faith and all other resource you got in developing something that can come handy,rather than watching netflix..can you say the person is investing on building asset.knowing neither its real state or stock or land bonds...?I think the legacy build by those people(jobs,gates,mark,so on..)They developed their most powerful asset
    – Shivanshu
    Apr 7 '20 at 19:05

If you own it, and you can sell it, then it's an asset.

If you write an app (and you do it on your own time and not as an employee of somebody else) then you own the copyright of that app. The app is yours. You can sell the copyright to somebody else.

If your app is completely worthless, it can't be an asset. But if somebody, somewhere, is willing to buy it from you, then it's an asset.

  • that's the rub... if nobody is willing to buy it from you then it's not an asset. but what if it has value to you and you would have been willing to buy it from somebody else had you not written it yourself? seems like that would be the same as a situation where somebody is willing to buy it from you, but nobody else would buy it from them...
    – Michael
    Apr 5 '20 at 17:40
  • 2
    Assets can have $0 values. It's still an asset, just a worthless one. Apr 6 '20 at 14:14

Any piece of intellectual property is an asset. How much that is worth can very extremely and could cost more than it's worth. For example, Facebook bought Instagram for billions of dollars. That would be the value of the asset.

A great example of this is if you want to change jurisdictions. Let's say you have some software called Shu App which was made in the US but you wish to lower your tax rate. To move Shu App to the British Virgin Islands, your US company has to realize a gain on the software because they are selling the asset.

A lot of assets are extremely hard to value and just because you create something does not mean its an asset if it can be easily knocked off.

  • Many terms you are using are bouncing off my head..I mentioned I dont understand anything about finance..
    – Shivanshu
    Apr 4 '20 at 20:36

A software development is a significant asset. Personally, I would value the software development as cost-of-development, plus opportunity reward, and plus creativity reward.

Now the cost-of-development is what it would cost to hire an application developer to develop a similar software. Or cost-of-development is the number of hours required to develop the software times the developer's subcontractor rate.

The opportunity reward is a value based on the developer's recognition of an opportunity to reach a competitive position in the market.

The creativity reward is a value based on original aspects of the software that can be noted and that if any.

So if the cost-of-development were $100000 I would probably value the software development at $300000.

But now that $300000 asset must have a yearly depreciation. And because the software code behind a current graphical interface can have value for many years, I would probably use a 30-year straight-line depreciation. So $300000 divided by 30 = $10000 yearly charge against earnings. In fact a shareware software can have many years of building-up a following such that the software might not ever be profitable. But that shareware software, as building up a following, could possibly sell to a commercial distribution at any time and so its value minus depreciation is maintained.

Well, I am encouraged to suggest a different software valuation method as:

SoftwareValue = CostOfDevelopment / (1 - CompanyGrossMargin) .

And if the company is development stage without a meaningful gross-margin then it could use an industry average.

  • 1
    Your software valuation is likely wrong. Cost of development is chiefly relevant in a market without competition, because it sets a barrier to entry to future competitors. But in any other market, e.g. games, it is possible that you never recoup the cost of development, let alone get a bonus for "opportunity" or "creativity".
    – MSalters
    Apr 5 '20 at 10:42
  • A company that has a software developer on salary gets more benefit from the software development than it pays in developer salary or else it would not be a profitable company on the immediate balance sheet. This is a viewpoint of "value added". The value of a software development must be the cost-of-development plus a value-added.
    – S Spring
    Apr 5 '20 at 14:06
  • 1
    If your plans were rubbish, then you can spend $100,000 to develop software that is worth $10,000. Your value-added is $-90,000. And obviously you can develop ten products for $100,000 each. If one is worth $2,000,000 and nine are worthless, only one is an asset.
    – gnasher729
    Apr 5 '20 at 14:21
  • An asset on the balance sheet that loses value faster than planned depreciation is an impaired-asset. A software development doesn't have a goal of becoming an impaired asset but has a goal of successful development. The goal of successful development is a value-added credit on the beginning balance sheet.
    – S Spring
    Apr 5 '20 at 14:32
  • There are viewpoints here that the value of a software development is in the income that it produces but that's not correct. The software development can simply earn more or less income than it has in depreciation on the balance sheet. The income reaches the balance sheet as cash. Furthermore, if the software development were sold from one company to another then it would need a "basis" and that's the current value on the balance sheet. The sale of the software development could be a capital gain or a capital loss. But the value of the software development sale could be based on its earnings.
    – S Spring
    Apr 5 '20 at 15:22

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