Intangible Value is Irrelevant for Managers

The first thing that businesspeople say in a conversation about intangibles is that they are so hard to value. Many people stop with this thought. They figure that there is no point in having a conversation about intangibles unless and until there is an accepted way to value them.

The value question is a vexing one. Efficient markets for trading intangibles are in their infancy. And valuation methods rely heavily on projections of future revenues that could be generated from individual intangibles-not the kind of hard data that makes businesspeople feel comfortable. Read more

Intangible Valuation Continues to Fuel Controversy

There is a great discussion here on the blog of IAM Magazine (IAM stands for Intellectual Asset Management) on the question of intangible value. Editor Joff Wild put out the question whether the declining stock market implies that the value of intangibles has disappeared. A spirited debate has followed with 12 comments to date. Here are some of the ideas that I included in my comments.

The stock market intangible gap: The gap between the stock market capitalization of companies and their tangible book value has narrowed due to the severe downturn in equity prices. Read more

Accounting for Intangible Assets

The Australian Accounting Standards Board recently published an interesting discussion paper here on “Initial Accounting for Internally Generated Intangible Assets.”  Comments on the paper will be accepted here through May 15, 2009.

The paper addresses the peculiar state of affairs that exists in accounting today Read more

The Value of Intellectual Capital

A recent post by Pat Sullivan prompted salutes here by IP Think Tank and here by IP Finance. Basically, Sullivan says that the current financial crisis “busts an intellectual capital myth,” that the value of intangible assets is the difference between the market value of a company and its tangible assets. It is from this approach that many of us often say that 70-80% of the value of a company today is intangible.

Sullivan entreats his readers, “I hope the recent vertiginous slide in stock prices will cause you to reconsider.”

I’m not convinced. The market does not value companies by looking at their balance sheets. In most cases, it never has. But I have always found the comparison between corporate valuations and tangible book value to be a powerful way Read more