Final answer:
An intangible asset, such as deferred pension cost, is created when a company offers a defined benefits retirement plan and promises to provide future pension benefits to its employees.
Step-by-step explanation:
An intangible asset, such as deferred pension cost, is created when a company promises to provide future pension benefits to its employees. This happens when the company offers a defined benefits retirement plan, where the employees receive a fixed income in retirement. The employer contributes to a pension fund over the employee's career, and this deferred pension cost represents the value of the promised future benefits.
For example, let's say a company promises its employee a monthly pension payment of $1,000 upon retirement. As the employee works and contributes to the company's pension fund, the company records a liability for the future pension payments. This liability is considered an intangible asset on the company's balance sheet.