Michael D. Moberly December 21, 2009
Yes, we’re in the midst (really just the front end) of a global, knowledge-based economy and, knowledge-based assets are, with few exceptions. intangible assets! And, yes, most intangible assets are not usually included – reported in a company’s balance sheets, nor are they easily measured, but, that does not lessen, in any way, their importance and contribution to a company’s value and/or revenue by serving as internal building blocks (foundations) for wealth creation and sustainability.
Intangible assets are especially relevant to SME’s (small medium enterprises) and SMM’s (small, medium multinationals) in a variety of ways and for a variety of reasons, the most dominant of which is the reality that a significant percentage (perhaps 80+%) of SME’s and SMM’s are in the service sector. Service sector firms are more likely to be grounded in – dependant upon their intangible assets to (a.) represent/emphasize their uniqueness, (b.) distinguish themselves in their market space, and (c.) build competitive advantages, etc., which can ultimately serve as the basis for generating income/revenue, when utilized effectively.
Relevant research conducted by the Association of Chartered Certified Accountants (headquartered in the U.K.) found, not surprisingly, that many SME’s are unable to effectively value their intangible assets which, in turn, undermines their ability to (a.) articulate/communicate those assets’ importance, relevance, and contributory value, (b.) sell-transfer their business for its true (real) value, and (c.) access much needed financing.
Underlying (embedded in) those not-so-surprising findings (and challenges) is another reality; many SME and SMM management teams retain a fairly narrow view (definition) of what actually constitute intangible assets beyond the conventional (proverbial) brand, reputation, image, goodwill, etc.
To advance intangible asset identification and valuation to benefit SME’s, a study conducted by ACCA’s Small Business Committee made a number of very plausible recommendations, several of which are described below:
1. Broadening SME management team (a.) awareness and recognition of the intangible assets they produce and (b.) strategies how they can be utilized, leveraged, and value maximized, etc.
2. Helping management teams develop specific language to more effectively communicate/articulate intangible assets in practical terms/contexts befitting specific (internal, external) audiences.
3. Because protection of intangible assets cannot always be achieved through conventional intellectual property rights, stress the necessity for management teams to develop alternative methods (best practices) to sustain control, use, ownership, and monitor value and materiality of their intangibles.
4. Development of a practical managerial (diagnostic) tool that would enable management teams to routinely identify, assess, utilize, and capture-maximize the value of their intangible assets.
(Adapted by Michael D. Moberly from the work of ACCA’s Small Business Committee and its policy briefing papers on matters specifically related to intangible assets.)
