It can often be useful to forecast the value of intangibles For instance, if you were trying to forecast a balance sheet into the future So we're going to use BASE analysis to help us out here The "B" stands for beginning and we start with the beginning intangibles figure or net intangibles figure, book value or carrying value from the balance sheet I then ask myself, what would I add or subtract from that figure? Well I add on purchases of new intangibles When we talk about intangibles, we're thinking about licenses, patents or copyrights So this would be the purchase of a new one But I then ask myself, what would I subtract? Why might the value of those intangibles go down? The classic here is amortization. Amortization is the planned reduction in value of intangibles So for instance, if I bought a license to operate a radio station to be allowed to broadcast on a certain frequency If that had a life of 10 years, then at the start of those 10 years it would have a lot of value But as the years went on, it would have less value and in its last year it would have very little value So you gradually have to amortize or reduce the value of that license It's exactly the same in principle to depreciation of tangible items So I take my beginning intangibles value, I add on the value purchases subtract the value of amortization and I get to my ending value of intangibles Again, just to note, that is net intangibles which will end up on your balance sheet Now an extra note here (just needs to be said), these are finite life intangibles we're talking about here Finite life intangibles are amortized However, if you have an indefinite life intangible such as goodwill You need to test that annually for impairment Very very difficult to forecast that; an impairment is an extraordinary or unplanned reduction in value