Readers have long heard the lament about the inability to measure, track and manage internally developed intangibles in a company’s financial statements. Intangible value drivers are key to a company’s success, but, borrowing from Drucker, how can they be managed if they can’t be measured?
Mary Adams, in Intangible Capital, argues that if there is no transaction, these home-grown assets will never be found on the balance sheet, but best practices dictate (at a minimum) the relevant costs should be tracked. Information managers need to monitor a company’s investments in IT, training, R&D, customer acquisition, brand development, for example, plus costs associated with acquisition of intangibles such as might be found in a company’s purchase price allocation under IFRS or GAAP. Let’s call it a Summary of Intellectual Capital Expenditures.
Will the summary reflect value? No. But it will begin the history the company needs to make good decisions with respect to resource allocation, provide for future ROI analyses, and eventually lead to meaningful valuation exercises.
Mary Adams will be offering a detailed analysis of the intangible drives of company value on Tuesday, September 20, in a BVR webinar.