Part 2 in a series of papers with perspectives on intangibles from the International Valuation Standards Council (IVSC), created by Kevin Prall and members of the Business Valuation Board, states that “human capital is the foundation from which all intangible assets are created, yet our understanding of human capital value creation and rigor around value measurement is less evolved than other intangible assets.”

How should human resources be analyzed by investors and measured by valuers? The authors note that human capital creates value that is “non-linear with varying a relationship between costs and value.”

Other characteristics of human capital value creation include:

• Human capital has a “very long economic life based on the ability to transfer knowledge”;
• This intangible asset networks with and leverages other assets to “drive higher and lower returns for those assets”; and
• New tools are available to benchmark and quantify these valuation factors. The study mentions the UBS Glass Door Employee Review Monitor comparing over 8,000 leading employers, which offers industry and other comparables and “relative performance to peers.” Similarly, FactSet now offers human capital scores as part of its ESG data sets (Glassdoor reviews are also a very large factor in the FactSet scores).