Difficulties Relating to the Recognition and Measurement of Intangibles Generally and of Brands in Particular
Difficulties relating to the recognition and measurement of intangibles generally and of brands in particular
Introduction:
With the development of market economies, knowledge economy and information industry, intangible assets as a necessary part of current business become one of the most important factors leading businesses to a success. In the previous years, people paid more attentions to tangible assets i.e. PPE, inventories, and other tangible assets that can produce future economic benefits. However, nowadays, people recognize that intangible assets would bring enormous benefits than we can expect. In fact, tangible assets, on average, are only 30% of the value of some companies. Especially, in the hi-tech industry, the percentage of intangible assets arrives to 90% in some companies. For instance, the US Microsoft, its book value is lower than GM’s, but its output value and profit is far more than the combination of three subsidiaries of GM. Furthermore, the ratio of intangible asset even reflects the strength of a company and makes the company more competitive. Intangible assets have real vale and are very important to a company's success, but are much harder to measure and quantify than their tangible counterparts. Therefore, what is the most significant point regarding to intangible asset is to recognize and measure reliably during accounting process thereby evaluating asset or even the value of a corporation more accurately and disclosing the actual information to accounting users. This essay will illustrate difficulties when recognizing and measuring intangibles and concentrating on the process of brand in particular.
Difficulty analysis:
IAS38 defines an in tangible asset as “an identifiable, non-monetary asset without physical substance”. It cannot be an intangible asset if an item is not an asset. As an asset, it must be controlled by an entity which also results in expected economic benefits flowing into the entity. Being distinguished from
Introduction:
With the development of market economies, knowledge economy and information industry, intangible assets as a necessary part of current business become one of the most important factors leading businesses to a success. In the previous years, people paid more attentions to tangible assets i.e. PPE, inventories, and other tangible assets that can produce future economic benefits. However, nowadays, people recognize that intangible assets would bring enormous benefits than we can expect. In fact, tangible assets, on average, are only 30% of the value of some companies. Especially, in the hi-tech industry, the percentage of intangible assets arrives to 90% in some companies. For instance, the US Microsoft, its book value is lower than GM’s, but its output value and profit is far more than the combination of three subsidiaries of GM. Furthermore, the ratio of intangible asset even reflects the strength of a company and makes the company more competitive. Intangible assets have real vale and are very important to a company's success, but are much harder to measure and quantify than their tangible counterparts. Therefore, what is the most significant point regarding to intangible asset is to recognize and measure reliably during accounting process thereby evaluating asset or even the value of a corporation more accurately and disclosing the actual information to accounting users. This essay will illustrate difficulties when recognizing and measuring intangibles and concentrating on the process of brand in particular.
Difficulty analysis:
IAS38 defines an in tangible asset as “an identifiable, non-monetary asset without physical substance”. It cannot be an intangible asset if an item is not an asset. As an asset, it must be controlled by an entity which also results in expected economic benefits flowing into the entity. Being distinguished from