Companies intangible assets are something which is not physical e.g. Patents, copyrights etc. How can we depreciate companies intangible assets and why it is done?
All assets which have a finite useful life are depreciated. For example, your patents or copyright might hold for 5 or 10 years but no more. Thus, it is quite coherent to reflect the loss of value through depreciation and amortization. Same goes for a software for example: in 5 years time, a software might be obsolete, so we need to reflect this in the financial statements.
However, the intangible assets which do not have a finite useful life (e.g. goodwill) will not be depreciated, though its value can be impaired. A great example was provided last summer by Microsoft.
The way it is done is the very same as for tangible assets.
Under IFRS, the relevant IAS is the IAS 38