Dr. Kretov Kirill - Basic classification of corporate assets. Introduction to Various types of Intangibles. “Making the invisible visible is the CEO’s job” (John Hagel, The McKinsey Quarterly) 1.0 Introduction Amid the many complicated and creative models encountered over the last decade, it has become evident for most companies that the valuation of Intangible Assets and Intellectual Capital has proven to be more theoretical than practical. Although a number of studies have been carried out on the valuation of Intellectual Capital, most of the findings seem more theoretical than practical. The concept of intellectual capital has already been researched by many elite scholars, who have created many interesting theories. However, most of their work is purely theoretical, and their concepts and theories are not widely accepted. Very few of them have been actually applied. For example, many papers have been written about intellectual capital and its importance to a company’s performance; quantitative analyses and reports show that intellectual capital is an emerging competitive advantage that results in long-term profits and greatly increases the value of the company. However, current accounting practices recognize only a very limited number of intangible asset types (in terms of intellectual capital). From the accounting perspective, the choice is very limited: there are R&D and Goodwill (the second being inapplicable to most companies). Only if the company is aware of the existence of some particular type of asset may it decide to estimate its value using a given valuation method (if one is applicable). The problem is that the final value is not a guarantee of the real value of an asset. Another practitioner may not agree with the valuation principle applied and may propose another that he finds more appropriate, or someone might apply a number of theories to the Intellectual Capital of a company and come up with a list of indicators that might not be accepted or understood by others who prefer other concepts. Thus, it seems that the root of the problem is not the lack of evaluation methods but the lack of widely accepted standards for these methods and for the reporting of the results. Moreover, there are issues involving patents, trademarks, copyrights, and other forms of “know-how”: exclusive rights, the most profitable kind, are given only to patent holders. An accountant recognizes only those assets recognized by current accounting practices (as regulated by the IFRS). Since reporting unrecognized assets is only optional, an accountant may decide not to spend time reporting them, especially if his motivation is not very high, and he wants to spare himself the work. Knowledge management scholars know that it is possible to identify where knowledge comes from and classify it using various theories and taxonomies. This can be helpful for companies that apply KM principles to create value through the continuous identification of the pieces of intellectual capital they create. The foregoing has described only a few of the perspectives from which the field of intangibles can be considered. 1.1 Historical Overview Intangible assets are not a modern invention or a phenomenon of the 21st century. Indeed, contrary to popular misconceptions, this type of asset has existed for a long time. Throughout human history, knowledge and information have remained two of the most precious commodities. The caveman who discovered the secret of manufacturing and used a spear to kill a mammoth faster and with less risk to himself possessed an intangible asset that meant the difference between life and death not only for the hunter-gatherer but also for his community. Similarly, the inventors of the alphabet, calendar, and mathematics possessed equally important intangible knowledge assets.
Dr. Kretov Kirill - Introduction to Various types of Intangibles.
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