UP to this point we have dealt with valuation of so-called tangible property, consisting of physical structures, equipment, and land used in public service. The unit prices, primary valuation, and deduction for depreciation have been conceived as attached to the physical objects included in the inventory of used and useful property. This applies also to construction and organization overheads.
There remain to be considered items which have been recognized as property, but which are not conceived as attached to physical objects. These are viewed as special titles apart from ownership or use of specific property units. They consist of franchises, water rights, patent rights, leaseholds, easements and similar non-physical assets possessed by the companies and used in public service. They are usually referred to as intangible property, in contrast to physical structures, equipment and land.
The question is how intangibles should be treated in determination of final fair value. Should they be given an independent and additional valuation, or are they properly regarded as embodied within the physical units of property? If they are to be treated as independent items distinguished from the physical inventory, how and upon what basis are they to be evaluated?
At the outset it is important to consider briefly the concept of tangible and intangible values. Where commercial value is involved, the distinction between tangible and intangible may be readily drawn for the purpose of managerial classification, but is largely arbitrary as real segregation of values into different categories. For an unregulated industrial property with