Assessment is a word that you are probably used to hearing in relationship with tools in the human resources area. Myers-Briggs and DiSC are two well-known tools that are used to assess the personality of people. Most people in business today can tell you the letters of their own Myers Briggs type. Another kind of assessment, 360° reviews, are used to get feedback on a manager from all sides, that is, those that work at a more senior level, as peers or as subordinates.
Over time, many of these tools have been refined and evaluated for statistical significance. The idea is to use a series of questions that indicate what’s going on inside a person’s head, how they work and interact with others. Because the output is delivered in the same way for each assessment, they become comparable across individuals and/or teams. The knowledge gained through an assessment like this helps create a starting point for change and improvement.
December 22, 2010 by Mary Adams · Comments Off
Valuing intangibles – dispatches from the front
For our first IAFS program of the new year, I’ll be interviewing panelists are James Catty, Chairman, International Association of Consultants, Valuators and Analysts; and Gabe Fried, CEO, Streambank LLC., a valuator and an asset-backed provider of liquidity.
We are going to talk about lessons learned in the recession about valuing intangibles–what’s happened to the valuation of intangibles in distressed sales? How has this experience on the ground changed the approach taken by valuation professionals?
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In posts over the past weeks, I have already shown you some simple but powerful ways of generating concrete information about your intangibles. The first is generating an inventory of key knowledge assets. The second is building a graphic or model that serves as a shared visualization of how your company combines and monetizes those assets in your knowledge factory. And the third is to start tracking your annual intangible capital expenditure.
But is it enough to just know how much money has been spent? Isn’t it also important to know whether your investment is working as well as you expected? Is it ready to handle your future challenges? Is your knowledge factory working up to its capacity? How do you know if your knowledge factory is functioning the way it should? Are these not the important questions that need to be answered in your business?
December 20, 2010 by Mary Adams · Comments Off
Every year, PriceWaterhouseCoopers (PwC) surveys CEOs around the world. Their 2009 survey asked CEOs about different types of intangibles information. Read more
Four reasons why the old accounting models don’t work and won’t ever be enough to measure the intangible economy
December 17, 2010 by Mary Adams · Comments Off
Today’s accounting systems keep track of certain types of financial transactions. (and mis-reports intangible financial transactions). There is a need to get good financial information about intangibles. But knowledge intangibles are a different kind of asset. It is hard to imagine a time when financial metrics alone will be adequate on their own to measure the health and performance of intangibles. There are several reasons for this: Read more
December 16, 2010 by Mary Adams · Comments Off
The roots of the balance sheet go back to 15th century Venice when merchants were building trading businesses that spanned the globe. They developed ways of keeping records for their businesses. These emerging practices were recorded by a monk named Luca Pacioli and his treatises became the foundation of the balance sheet and income statement that are still used today. The model held up remarkably well through many centuries and came into its own as standards for financial statements were codified in the early years of the 20th century. Public reporting of these statements was begun in response to calls for greater transparency following the Great Depression of the 1930s.
The traditional balance sheet is one of the key financial statements produced by every business. It records all the physical assets owned by a company as of a certain date. It also records monetary liabilities and the equity of the corporation. Together, these two sides of a balance sheet served for centuries to demonstrate the health of an organization by reporting the amount of investment the organization makes in its productive capacity as well as the kind and mix of its assets and liabilities.
But today, the average balance sheet explains only 20% of the value of a company. This is due to the growing importance of knowledge assets which usually are not included on the traditional balance sheet. Read more
This week, we’ve been talking about collecting data on intangibles investment.
This discussion seems to beg the question of how it will be used. In contemporary accounting, the investment by an organization in tangible assets is “capitalized” on the balance sheet and depreciated over time. This serves as a way of keeping non-operating expenses (that is, not related to the current year’s operations) out of the income statement. It also serves as a way to track the cumulative effect of investing in a company’s capacity over time. As we have explained in previous posts, this model is not used for intangibles.
So if we recommend tracking intangibles investment, does that mean that we think intangibles should go on the balance sheet? Read more
December 9, 2010 by Mary Adams · Comments Off
This is a follow-up to yesterday’s post about intangible capital expenditure.
When you are starting out, an i-capex report will just be a separate report in your accounting system or in a spreadsheet to be used to report to management or your board of directors. Ideally, you should go back a few years so that you start out with a data series that you can use to learn about the patterns of your spending. When you do this, you might want to also gather some demographic data that can be used in calculating ratios. Read more
Last week, in my interview of Alan Anderson and Chuck Hulten on accounting and intangibles, Alan made a statement that has stuck with me: That in all his travels in his own business and through his activities with the AICPA, he has never heard people say that they use their GAAP statements to make business decisions.
But businesspeople use their accounting information all the time. They just use it for presentations and analyses that better suit their needs. This is often called managerial accounting as opposed to statutory reporting (which conforms with GAAP or IFRS).
This post is about just such a use. It is about tracking the amount of money that you invest in intangibles each year.